[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
  DRUGSTORES ON THE NET: THE BENEFITS AND RISKS OF ON-LINE PHARMACIES

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 30, 1999

                               __________

                           Serial No. 106-51

                               __________

            Printed for the use of the Committee on Commerce



                     U.S. GOVERNMENT PRINTING OFFICE
58-498 CC                    WASHINGTON : 1999



                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                     FRED UPTON, Michigan, Chairman

JOE BARTON, Texas                    RON KLINK, Pennsylvania
CHRISTOPHER COX, California          HENRY A. WAXMAN, California
RICHARD BURR, North Carolina         BART STUPAK, Michigan
  Vice Chairman                      GENE GREEN, Texas
BRIAN P. BILBRAY, California         KAREN McCARTHY, Missouri
ED WHITFIELD, Kentucky               TED STRICKLAND, Ohio
GREG GANSKE, Iowa                    DIANA DeGETTE, Colorado
ROY BLUNT, Missouri                  JOHN D. DINGELL, Michigan,
ED BRYANT, Tennessee                   (Ex Officio)
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Abromowitz, Herman I., Member, Board of Trustees, American 
      Medical Association........................................   251
    Behrens, Christine, WWMT.....................................    16
    Bernstein, Jodie, Director, Bureau of Consumer Protection, 
      Federal Trade Commission...................................    44
    Catizone, Carmen A., Executive Director, National Association 
      of Board Pharmacies........................................   246
    Culmo, Cynthia T., Director, Division of Drugs and Medical 
      Devices, Texas Department of Health........................   260
    Egan, Kathy, NBC10/WCAU Philadelphia.........................    14
    Fong, Ivan K., Deputy Associate Attorney General, Department 
      of Justice.................................................    87
    Michel, Bob..................................................    17
    Neupert, Peter, President and CEO, Drugstore.com.............   269
    Razzouk, William, Chief Executive Officer, PlanetRx.com......   265
    Stovall, Hon. Carla J., Attorney General, State of Kansas....    18
    Woodcock, Janet, Director, Center for Drug Evaluation and 
      Research, Food and Drug Administration.....................    93
    Yui, Ellen...................................................     9
Material submitted for the record by:
    Kocot, S. Lawrence, Senior Vice President, Government Affairs 
      and General Counsel, National Association of Chain Drug 
      Stores, prepared statement of..............................   283

                                 (iii)

  


  DRUGSTORES ON THE NET: THE BENEFITS AND RISKS OF ON-LINE PHARMACIES

                              ----------                              


                         FRIDAY, JULY 30, 1999

                  House of Representatives,
                             Committee on Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9 a.m., in 
room 2123, Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Bilbray, Whitfield, 
Blunt, Bryant, Bliley (ex officio), Klink, Stupak, Green, 
McCarthy, and DeGette.
    Also present: Representative Brady.
    Staff present: Lori Wall, majority counsel; Amy Davidge, 
legislative clerk; and Chris Knauer, minority professional 
staff.
    Mr. Upton. Good morning.
    Before we begin this hearing this morning, I want to remind 
witnesses that are testifying here today that the committee 
expects to receive testimony 2 days prior to the hearing. The 
purpose of this rule is so that members and their staffs have 
time to adequately review the statement and are able to educate 
themselves on the testimony that they will be giving at the 
hearing as well as prepare questions.
    I would note that, with the exception of one witness, every 
piece of testimony was late. In fact, the testimony from the 
FDA was not received until after 8 o'clock last night, and that 
is unacceptable.
    This committee noticed the hearing more than 2 weeks prior 
to this date and provided ample time for invited witnesses to 
provide testimony. Ironically, those witnesses who were 
notified last were the first ones to have their testimony 
submitted to the committee, and in the future I would ask all 
of you to extend the courtesy of having your testimony at least 
2 days prior to the hearing.
    I would also note for the record that last night we had 
votes after midnight. There are a number of subcommittees that 
are already meeting this morning and so we expect members to 
straggle in over the next couple of hours. And I would note for 
the record that all members, by unanimous consent, will have 
their opening statement made as part of the record.
    Today, this subcommittee is holding the first hearing in 
the history of the Congress on the issue of on-line pharmacies. 
Several years ago, no one would have even known what the term 
meant, sort of like Y2K. Today, technology allows us to order 
everything from daily prescription medication to contact eye 
solution to Q-Tips from one Web site over the Internet, have it 
delivered to our door promptly and often at a lower price than 
the neighborhood drugstore. Clearly, electronic commerce is 
growing at a rapid pace across the country and across the 
world.
    With this growth in electronic commerce, we also need a 
dose of caution. The Internet can often pose dangers to 
consumers who are not able to distinguish legitimate Web sites 
from those that may be violating the law. Many Web sites today 
allow consumers to order prescription medication, often without 
ever seeing a doctor face-to-face and sometimes even without a 
valid prescription. Among the concerns is the product quality 
of these drugs and whether patients may be at risk of serious 
and even fatal drug reactions due to lack of oversight from a 
physician.
    Since this committee began its investigation of on-line 
pharmacies over 7 months ago, the number of Web sites selling 
pharmaceuticals has increased rapidly. Estimates are that there 
are some 400 Web sites on the Internet today selling instant 
prescriptions. Some of these sites operate for a short period 
of time at one Web site address before disappearing and showing 
up under another name, making it difficult for anyone to track 
them down. Others prey upon Y2K fears of consumers. These sites 
advertize that in order to make sure the consumer has enough 
medication at the turn of the century they should order their 
pharmaceuticals from a particular Web site, often at a higher 
price than the consumer would otherwise pay.
    As part of our investigation, we have met with Federal 
regulators, State medical and pharmacy boards, health care 
associations and a host of other interested parties. Like these 
organizations, our first and foremost interest has been the 
public health care concern arising from unscrupulous Web sites 
selling products without a valid prescription or situations 
where the customary physician-patient relationship simply does 
not exist.
    In my home district of Kalamazoo, Michigan, Channel 3 News 
was able to order Viagra for a cat, dog, a deceased individual 
and a man with a heart condition. I would note that the cat's 
name was Tom, and they even admitted that he had been neutered. 
The ease at which these transactions happened was more than 
alarming. These unscrupulous sites pose a threat to the health 
and safety of the American public and certainly undermine the 
public's confidence in legitimate on-line pharmacies.
    Our hearing today is an attempt to discover the 
jurisdictional lines that exist dividing State responsibility 
with that of the Federal Government. As many here well know, 
the issue of licensing pharmacies and doctors lies within the 
States. Other issues, such as dispensing without a prescription 
at all, lie within the FDA. Clearly, in order for us to begin 
to solve some of the problems associated with on-line 
pharmacies, we must all work together. The Internet poses new 
challenges that did not exist certainly 10 years ago. 
Technology is outpacing our abilities to react in many 
instances.
    This is not to say that we have had no success. Some States 
and even some Federal agencies have had limited success in 
enforcing the laws currently on the books. We need to make sure 
that these enforcement actions against unscrupulous sites 
continue.
    Just as we need a dose of caution in dealing with the 
growth of on-line pharmacy, we also need a dose of caution in 
responding to abuses of it. We will hear today of the positive 
ways in which this technology is serving the needs and 
pocketbooks of consumers. We don't want to inadvertently 
strangle the further growth of this technology in an effort to 
prevent its abuse by some. It is a double-edged sword.
    It is my understanding that an interagency working group 
has been established to look at how best to prevent the misuse 
of this technology most effectively. I think that is an 
appropriate first step. I would like to see this effort 
intensified and broadened to include the States and other 
parties which have responsibility under current law for the 
regulation of pharmacy and interstate commerce.
    I will continue to be vigilant in looking at this issue and 
am committed to holding additional hearings. I would like to 
thank all of the witnesses who are here today, especially 
Christine Behrens from WWMT-News 3 in Kalamazoo; and I welcome 
the ranking member of the subcommittee, Mr. Klink from 
Pennsylvania.
    Mr. Klink. Thank you, Chairman Upton, for having this 
hearing and really thank you for your cooperation and the 
majority's cooperation in working so closely with us in the 
minority on what I think is probably one of the most important 
issues that we will take on this year. The ramifications are 
just unbelievable.
    Without a doubt, the promise and the potential of the 
benefit of on-line pharmacies are very dramatic. The ability to 
prescribe a wide range of medications without the need to wait 
in long lines or to discuss one's ailments in public are 
significant. So, too, is some of the health information being 
dispensed by certain legitimate sites, but with these benefits 
come some significant risks. Presently, any U.S. Citizen can 
logon to the Internet and purchase almost any prescription drug 
and often without a prescription or providing only minimal 
information.
    Mr. Chairman, the sale of potentially dangerous drugs and 
the potential volume of such activity is not trivial. At last 
glance, our subcommittee staff has identified nearly 200 sites. 
You can look at them. Many of these sites operate from abroad, 
and they sell everything from extremely addictive pain killers 
to steroids. The National Association of Boards of Pharmacy has 
identified perhaps as many as 400 sites, and such lists grow 
longer each day. We have identified another 30 or so sites each 
week that we have looked.
    Many sites, both domestic and international, are able to 
sell to U.S. Consumers with no scrutiny at all. I am extremely 
troubled by the vacuum of regulatory oversight that now exists 
at both the State and Federal level, particularly given the 
endless laundry list of drugs that are now available.
    Today we are going to hear from the many regulators, 
including officials from the Food and Drug Administration, the 
Federal Trade Commission, the Department of Justice and from 
several States. They will tell us what they are doing, and they 
will say that they are doing bold and magnificent things in 
overseeing the explosion of Internet pharmacies. They also will 
try to convince us that they have a framework in place to 
diligently address this matter.
    But I want to tell you something. So far, I am not 
convinced that either the States or the Federal Government is 
even close to getting a handle on this problem. The States seem 
overwhelmed and indeed in need of resources, while the Federal 
Government is still trying to determine which agency or which 
department is in charge; and, meanwhile, these sites are 
proliferating.
    Alarmingly, no Federal or State agency has so far been able 
to provide this subcommittee with the most basic of information 
regarding the bulk of the pharmacy sites now operating on-line. 
For example, we still don't know the physical location of most 
of these sites or even if they operate with a U.S. State-issued 
license. We also know very little about the persons behind such 
sites or whether they hold all the appropriate license for the 
State in which they are doing business.
    There are other concerns. For example, are such 
practitioners in good standing with the State boards of 
pharmacy or medicine from which they hold credentials? How 
would we know? These are simple questions that should be 
answerable in a matter of minutes, and they can be for the 
average brick and mortar pharmacy located in your neighborhood. 
Yet because we are so awed by e-commerce we tolerate a system 
that discloses almost no information to the consumer or to the 
regulator.
    Now, I appreciate the sensitivity of using the words rules 
and e-commerce both in the same sentence. But I will tell you, 
Mr. Chairman, I am concerned that a wild-west world is 
unfolding before us, where many consumers are accessing 
potentially dangerous drugs with little or no practical 
guidance. Yet because it is e-commerce there is a mentality it 
must be progress.
    But is it progress if a 6- or 7-year-old child can purchase 
a prescription drug over the Internet and have it delivered to 
her door with no questions asked? Is it progress if people 
posing as cats or dead people are able to get drugs that they 
ordered, even though they disclosed that information on-line 
with their consultations? And is it progress if a person that 
discloses that they are taking a drug that would produce severe 
interactions with the other drugs that they are taking that 
they receive that drug anyway with no questions asked? That is 
not progress. That is greed, and it is sloppy public policy.
    My constituents and, frankly, all of the citizens of this 
great Nation deserve the same level of protection with on-line 
sites that they have with their corner drugstore, nothing more, 
nothing less.
    Mr. Chairman, under the present regulatory system, getting 
a drug to market is an extremely rigorous process. This 
subcommittee has dealt with it. It takes years of trials and 
review before a drug is approved. If approved, a host of State 
and Federal licensing requirements exist over the manufacturer 
and the doctors and the pharmacists that issue and fill the 
prescriptions. This system is designed to protect consumers 
from addiction, drug interactions and the use of unapproved or 
dangerous substances. Yet, in many cases with just a click of 
the mouse, we now have managed to turn this entire system 
upside down and inside out. What is it about e-commerce that 
permits us to tolerate a system with almost no rules when the 
stakes are so high? Indeed, the stakes are life and death.
    Mr. Chairman, just what protection should a consumer have 
when purchasing potentially dangerous drugs from the Internet? 
Presently, there is nothing that requires a drug-dispensing Web 
site to disclose anything to the public. Buyers usually don't 
know if a site is licensed or if the site uses licensed doctors 
or pharmacists. In many cases, the buyers don't even know the 
physical address of the site or if it has ever been inspected. 
That is because, under the current laws, elevators, escalators 
and hair stylists are required to display more licensing 
information than Web sites that are selling potentially lethal 
drugs.
    Let me conclude by saying that because so many sites appear 
to be operated in this unregulated gray zone and report to 
almost no one, the true quality and source of these drugs might 
be viewed with caution. Counterfeit and expired drugs can be 
repackaged and sold as new, and the public may never know they 
are at risk. And I, frankly, would like to know the sources of 
many of these drugs as well as their quality.
    Further, I would be interested to hear from the makers of 
Xenical, Propecia and Viagra, just to name a few, but these are 
three of the drugs that are most prevalent on these sites. I 
want to know about how they think their products are getting 
into the market through e-commerce. How have they penetrated 
this stream of commerce? Are they legitimate and thus being 
diverted or are these counterfeit products? What do the 
manufacturers know?
    Like the many Federal agencies that are being asked to 
explain their actions in this area, perhaps the drug makers 
should be invited, Mr. Chairman, to one of our next hearings. 
They may have some of their own accountability issues.
    I thank you for your patience, and with that I yield back 
my time.
    Mr. Upton. Thank you.
    The gentleman from Tennessee, Mr. Bryant.
    Mr. Bryant. Thank you, Mr. Chairman. I do appreciate your 
holding this hearing today and would especially like to welcome 
Mr. William Razzouk of PlanetRx.com. As you may know, Mr. 
Chairman, Memphis, Tennessee, is the distribution center of the 
Nation, and we are proud to welcome PlanetRx.com's pharmacy to 
our State of Tennessee.
    Mr. Chairman, first, do no harm is sage advice for and from 
our medical community. The Internet offers a vast opportunity 
for consumers and businessmen alike. This new and seemingly 
limitless resource provides everyone who can click their index 
finger with access to a wealth of information, instant 
communication and the convenience for shopping for goods and 
services from the comfort of their own home. But for all the 
Internet does now I think it is safe to say that it is still in 
its infancy and, as such, it is very susceptible to the actions 
or perhaps even inactions of government, both State and 
Federal.
    I feel very strongly that government, both Congress and 
this administration, must tread carefully, though, that we 
ensure not to hurt the delicate new business opportunities that 
are available on the Internet. At the same time, however, e-
commerce can only continue to grow if consumers feel secure 
about shopping on the Internet, and I think the two speakers 
that have given very excellent statements before me have 
indicated the potential for problems out there. Businesses such 
PlanetRx.com and Drugstore.com have invested significant 
resources in building a solid reputation with their customers, 
but this reputation can be tarnished by the unscrupulous Web 
sites offering consumers the chance to purchase medications 
without a prescription.
    Mr. Chairman, this is an important hearing because I think 
it will help show us what the role of government should or 
perhaps should not be with respect to e-commerce, and I am 
looking forward to hearing from our distinguished witnesses, 
and I thank the Chair.
    Mr. Upton. Thank you.
    The gentleman from California, Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Mr. Chairman, I have reviewed some of the written 
testimony, but I would ask my colleagues to reserve our 
conclusions until we hear from the witnesses, are able to 
dialog with the witnesses and develop some kind of consensus.
    There has been a reference of the fact that e-com is 
actually maybe turning into the wild west. Well, let me tell 
you, as a Californian, that is not necessarily a negative 
thing. I want to say, though, that there is going to be 
problems. I think that we have problems. I think we have 
problems not only with pharmaceutical drugs but I think we have 
problems with consumer products across the board, including the 
sale of alcohol over the e-com. But I think that we should 
approach this as saying that e-com is a great challenge, but it 
is a great opportunity.
    You know, one of the major clashes that this country had 
with Great Britain before we broke away was the fact that Great 
Britain figured that it was easier not to allow any settlers to 
move into the wild west, that we should outlaw them and keep 
them east of the Alleghenies, and that would have been easier 
for government to restrict the individual's ability to move to 
the west and get into trouble. I think that we do have troubles 
in the wild west, and I think that we need to address them. But 
I hope that as we approach this that the issue with the 
challenge of Congress, the challenge of government and the 
challenge of the community at large is to work out the 
problems, maintain this great opportunity for individuals, for 
economic and social progress but at the same time avoid the 
potential for gross abuse of a new technology.
    And so I look forward to finding those answers, a way to be 
able to tap into the good of the e-com and avoid the bad.
    So, Mr. Chairman, I look forward to this testimony and 
yield back my time.
    Mr. Upton. Thank you.
    [Additional statements submitted for the record follow:]
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Today, this committee continues the work it began last year, 
examining various aspects of doing business on the Internet--known as 
e-commerce.
    I have been a strong advocate and promoter of the consumer benefits 
of electronic commerce. This marketplace grows by leaps and bounds 
every month, revolutionizing the way America and the world conduct 
business.
    As e-commerce continues its extraordinary growth, it can greatly 
improve the lives of ordinary Americans. This is especially true when 
it comes to the delivery of necessary prescription medication. Millions 
of Americans are dependent on prescription medication. On-line 
pharmacies have the potential to increase access and lower the cost of 
prescription drugs for millions of Americans.
    In an age in which the words ``time deficit'' have entered the 
popular vocabulary, the ability to have necessary prescriptions 
delivered to the front door by overnight delivery, and at a real cost 
savings, is a tremendous convenience for time-pressed working families.
    For the disabled and for the millions of senior citizens who have 
difficulty getting around, this new marketplace has the potential to 
drastically improve their access to medications, and thus their quality 
of life.
    However, we must not be blind to the vast potential of the Internet 
to attract unscrupulous operators, who set up sites to sell their 
wares, without the best interest or safety of consumers in mind. Many 
web sites are offering prescription drugs prescribed by an unseen on-
line doctor or without even a prescription. Many of these sites give no 
indication of their location or the individuals operating it, raising 
concerns about the legitimacy of the web site. Because of their slick 
packaging, many of these sites fool consumers into believing that they 
are legitimate providers, when in fact they are unlicensed to dispense 
drugs or do so in ways that violate state or federal laws.
    I want to stamp out these bad actors. We need to encourage strong 
enforcement action by the States and the Federal government of the laws 
already on the books. Some states, such as Kansas, take action against 
on-line pharmacies and web doctors who have violated the laws of their 
respective states. Several other States are beginning to follow the 
lead of Kansas to shut down these sites. We applaud their efforts.
    Additionally, I believe that the Federal and State governments must 
work together to address illegal or unscrupulous practices by on-line 
pharmacies. I suggest the establishment of a joint Federal-State task 
force to examine whether current laws and regulations are adequate to 
protect purchasers of drugs on the Internet--and if not to recommend 
changes to those laws.
    At the same time, it is important that we do not over react by 
piling layers of new regulations on to an emerging marketplace--one 
that provides great benefits to consumers. I am excited about the 
promise this new marketplace brings to working families, the disabled, 
and senior citizens across the country. Let's continue our oversight of 
this new marketplace, to ensure that its promise is fulfilled in a way 
that also protects on-line purchasers. I would like to thank all of our 
witnesses for joining us here today.
                                 ______
                                 
 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan
    Thank you Mr. Chairman. I applaud you for holding this very 
important hearing today.
    With the explosion of internet commerce over the past several 
years, we have realized a significant change in the way business is 
conducted. It seems that every day there is a new internet business 
coming on-line or going public on the stock market. There are 10,000 
new internet domain names being registered each day. Many of the new 
domains belong to well established businesses who are making the 
transition to E-commerce. Others are being assigned to speculative 
upstart businesses who hope to take advantage of this fantastic and 
relatively new medium of commerce. Still others are starting up 
questionable businesses with little regard for the health, safety, or 
welfare of the internet consumer. Mr. Chairman, it is those 
unscrupulous businesses that concern me greatly.
    In preparation for this hearing I took the time to surf many of the 
websites which provide drugs over the internet. In very few instances 
was it clear that companies took reasonable and necessary safeguards 
when filling prescriptions over the internet. Sites such as 
Drugstore.com and PlanetRX.com appear to be among the sites that 
provide such safeguards. I applaud their efforts to supply safe, 
physician prescribed pharmaceuticals.
    Unfortunately, there are countless other sites that are peddling 
drugs with very little, if any, verification of prescription or health 
needs. On many of the sites I found that there is no way to tell 
whether the site is operated by legitimate licensed pharmacists or if 
there is even a medical doctor who reviews the application for the 
drugs. I could not tell where the supplier, or website operator, was 
located. Are they located in the United States/Europe/Asia/the Middle 
East? Are they receiving their drugs directly from the manufacturer or 
a licensed wholesaler? Are the drugs you're ordering truly of the 
purity and potency that you need or even actually the drug that you 
thought you ordered? If not, what is the consumer's recourse with no 
address, phone number or identification for follow-up questions, let 
alone follow-up monitoring based on drugs provided to you? These are 
just a few of the questions that I have and I am sure today's hearing 
will raise many more.
    When I go to my local neighborhood pharmacy to have a prescription 
filled, I walk in and have a face-to-face conversation with the 
pharmacist. That pharmacist is required by the State of Michigan to 
abide by many regulations in order to operate his or her business. They 
must have completed the requisite education in order to dispense the 
prescription drugs, the pharmacy must be licensed, and they purchase 
the medications from licensed, reputable and accountable wholesalers 
and manufacturers. In order to receive my medication, I must present a 
prescription from my doctor. Before filling the prescription, the 
pharmacist will check to ensure that the medication I'm receiving will 
not cause a harmful or deadly reaction with other prescription drugs 
that I may be taking.
    Why then, do we not have these same precautions for internet 
businesses acting as pharmacies? Why do these web sites not have to 
disclose where they are doing business from or give a number to call 
for questions let alone for an emergency, should there be a problem. 
Why do they not have to post who the doctor is who is reviewing the 
request that is being sent in? And why do these sites not have to list 
the states or countries that they are licensed in? I have had the 
opportunity to review some of the written testimony and it appears that 
the FTC and Ms. Culmo of the Texas Department of Health have expressed 
many similar concerns and I look forward to their testimony today.
    Lastly, I am concerned about the issue of privacy for those who may 
choose to purchase prescription drugs over the internet. If a person 
decides to purchase prescription medication via an internet pharmacy, 
what provisions do we have in place that would prohibit the internet 
drugstore from selling information about you and your health records or 
financial transactions to other businesses? Will your medical history 
now become the newest item for sale on the internet so you can be 
spammed? If you order viagra from one of these unregulated businesses 
will this personal information suddenly be sold to other net businesses 
who want to peddle you products or services associated with the 
prescriptions.
    Mr. Chairman, I look forward to hearing answers to the questions 
I've outlined here this morning. This is not merely an issue of E-
commerce, it is a matter of public health and individual privacy.

    Mr. Upton. I have been alerted a number of members are on 
their way down, but I think in the meantime we will ask the 
witnesses for the first panel to take their place at the table. 
Ms. Ellen Yui; Ms. Kathy Egan from NBC10/WCAU in Philadelphia; 
Ms. Christine Behrens, WWMT and Channel 3, Kalamazoo; Mr. Bob 
Michel; and the Honorable Carla Stovall, Attorney General from 
the State of Kansas, if you would take a place at the table.
    As you may know, this subcommittee has a long tradition of 
taking testimony under oath. There is a vote on, but I think I 
will swear you in at this point, and then I think we will take 
a break. And if members could come back promptly after this 
vote, we will continue with the testimony when I get back.
    We have a long tradition of taking testimony under oath. Do 
any of you have objection to that? We also, under House rules, 
allow you to have counsel if you would like. Do any of you 
desire counsel?
    If you would stand and raise your right hand.
    [Witnesses sworn.]
    Mr. Upton. You are now under oath, and we will take a brief 
adjournment for us to go vote, and we will return with your 
testimony in about 10 minutes.
    [Brief recess.]
    Mr. Upton. We will reconvene.
    The good news is we are going to have only one more vote 
that will interrupt us today, in all likelihood, and that won't 
be for a couple of hours so we can get into this in earnest.
    Okay. You have been sworn in. I was with Mr. Klink. He 
should be back within a minute or 2. So I think we can get 
started with your testimony.
    We will start with Ms. Yui. Did I say that right?
    Ms. Yui. Yes.
    Mr. Upton. Welcome to the subcommittee.
    Let me just make a point for all witnesses. We would like, 
if you can, to limit your remarks to about 5 minutes. I have a 
little timer that is here that is pretty fancy. You will see 
these lights go on and off.
    I guess it is not a pretty neat timer. It doesn't work. We 
will watch the clock, I guess. We need two light bulbs, but if 
you limit your remarks to 5 minutes, that will be perfect.
    Your entire statement, obviously, will be made part of the 
record. Please go ahead.

  TESTIMONY OF ELLEN YUI; BOB MICHEL; KATHY EGAN, NBC10/WCAU 
   PHILADELPHIA; CHRISTINE BEHRENS, WWMT; AND HON. CARLA J. 
           STOVALL, ATTORNEY GENERAL, STATE OF KANSAS

    Ms. Yui. Mr. Chairman, thank you for inviting me here today 
to testify about the benefits of drugstore shopping on-line.
    I am very familiar with the world of e-commerce because I 
spend a good part of my day in front of the computer, and it is 
that personal computer that has afforded me the opportunity to 
run a small business from my house, enabling me to continue my 
career as a communications consultant, earn money, and be near 
my two boys, all at the same time. My husband also runs his own 
business, which would not be possible without the Internet. We 
conduct our banking on-line and purchase personal computers, 
software, books, CDs, plane tickets, even great cheese from 
France, on-line.
    With that in mind, I wish to talk to you today about three 
thoughts that come to mind when I think of on-line pharmacies: 
convenience; privacy, which has a double meaning here; and 
cost.
    Time, or the lack of it, is the overriding theme of my 
life. I actively seek services and products that will save me 
time, make me more efficient, educate me and, of course, save 
money for those looming college tuitions.
    Permit me to take a minute and describe for you my typical 
day as a working mom, and you will understand why.
    When I wake up at 6 o'clock in the morning a clock watch--a 
stopwatch clicks on in my brain, and I start running from one 
juggling act to another. I try to get out of bed before my 
family to walk my two dogs. This is not always possible because 
my husband travels 3 to 4 days a week, basically making me a 
single mom much of the time. I get myself dressed, my kids 
dressed, feed everybody breakfast, get the kids off to school 
and then race back to my desk at home before the phone starts 
ringing. I work all day.
    If I am lucky, I can squeeze in a personal errand, such as 
running to the supermarket, the dry cleaners, car wash, maybe 
volunteer at my children's school, but getting away from my 
desk seems to be more and more problematic. At 5 o'clock, my 
wonderful child care provider goes home; and it's another dog 
walk, homework, dinner, baths, reading to the boys, sometimes a 
little more work or bills, and then I collapse. You could poll 
1,000 working moms across this country, and I would venture to 
guess you would hear 1,000 similar renditions of that story.
    Juggling all of this leaves me almost no time for shopping, 
any kind of shopping. I am almost embarrassed to admit how 
often I run out of basic supplies at home. So the opportunity 
to purchase cough syrup, ibuprofen, Band-Aids, tissues, 
vitamins, hair spray or my favorite nail polish, without long 
lines, crowded aisles, slow cashiers and parking hassles is a 
dream come true. For me it's a luxury that translates into 1 
more hour of quality time with my kids. And dragging them to 
stores is not pleasant for the kids, for me or for anybody in 
that store.
    But also important to me is the good health care 
information that is provided on these sites. I am very 
skeptical of any drug, prescribed or over-the-counter, and I am 
always a bit nervous about their possible side effects, 
particularly in my children's small bodies. I was thrilled to 
discover the wealth of information that I can access on-line.
    In my family, we do require some regular medication; and 
on-line pharmacies can take my order and payment in minutes, 
deliver the prescription directly to my home and even send me a 
reminder e-mail that it's time to refill my prescription. Now, 
for me, that's a Godsend.
    For years, I purchased prescription drugs from our local 
family pharmacy conveniently located in my doctor's building; 
and, frankly, he is who I want to do business with. I am a 
small business owner. I support small businesses. But, 
unfortunately, he's nearing retirement age, he's scaling back 
and he's not as convenient anymore. To my chagrin, the age of 
personal service at pharmacies has passed. Because of many 
negative experiences I've had with impersonal service and 
multiple incorrectly filled prescriptions at major chain 
pharmacies, I don't believe I am missing out on customer 
service by buying on-line.
    In fact, today's drug counters don't offer an opportunity 
for a private discussion between a pharmacist and a consumer. 
You can picture what I mean. You're down on the floor, you're 
looking up at the pharmacist and often shouting questions, 
letting the whole world know that your kids have caught 
something at school, like whooping cough, head lice or 
something else you don't want to share with the world.
    With some on-line pharmacies, I can even e-mail questions 
directly to a pharmacist in the privacy of my own home 24 hours 
a day, 7 days a week. Now, that's a service and a convenience I 
need in my life.
    That's not to say I don't have quite a few reservations, 
and here's the flip side of the privacy issue. I'm always 
cautious about on-line purchases and sometimes worry that I 
might expose myself to financial fraud or that a company will 
sell my name and data about my buying purchase patterns to 
another firm. And of course, as a mother, I hope Congress can 
find a way to prevent children from buying inappropriate or 
illegal drugs over the Internet.
    I am also making the assumption, perhaps naive, that I am 
just as protected on-line as I am protected at any major chain 
pharmacy. I know that protecting consumers is a daunting task 
for Congress, the FDA and other regulatory bodies.
    Finally, cost. On-line pharmacies can offer products at 
reduced cost. As they become more accepted by consumers and 
health plans, their ability to offer products at competitive 
prices will increase, and that is good news for consumers, not 
to mention that more time for my family is priceless.
    Thank you very much, and I'd be happy to answer any 
questions.
    [The prepared statement of Ellen Yui follows:]
                    Prepared Statement of Ellen Yui
    Mr. Chairman, thank you for inviting me here today to testify about 
the benefits of drugstore shopping online.
    I am very familiar with the world of e-commerce because I spend a 
good part of every day in front of a computer. And, it is that personal 
computer that has afforded me the opportunity to run a small business 
from my house, enabling me to continue my career as a communications 
consultant, earn money, and be near my two boys, all at the same time. 
My husband also runs his own business, which would not be possible 
without the Internet. We conduct our banking on-line, and purchase 
personal computers, software, books, CDs, plane tickets, even great 
cheese from France, on-line.
    With that in mind, I wish to talk to you today about three thoughts 
that come to mind when I think of on-line pharmacies: convenience; 
privacy--which has a double meaning here; and cost.
    Time, or the lack of it, is the overriding theme of my life. I 
actively seek services and products that will save me time, make me 
more efficient, educate me, and of course save money for those looming 
college tuitions.
    Permit me to take a minute and describe for you my ``typical day as 
a working mom,'' and you'll understand why. When I wake up at 6:00 am, 
a stopwatch is clicked on in my brain, and I start running from one 
juggling act to another. I try to get out of bed before my family and 
walk my two dogs. This is not always possible, as my husband travels 
three to four days a week, basically making me a single mom much of the 
time. I get myself and my kids dressed, feed everybody breakfast, get 
the kids off to school, and then race back to my desk at home before 
the phone starts ringing. I work all day.
    If I'm lucky, I can squeeze in a personal errand, such as running 
to the supermarket, the dry cleaners, car wash, maybe volunteer at my 
children's school, but getting away from my desk seems to be more and 
more problematic. At 5:00, my wonderful childcare provider goes home, 
and it's another dog walk, then homework, dinner, baths, reading to the 
boys, sometimes a little more work or bills, and then I collapse. You 
could poll 1,000 working moms across this country, and I would venture 
to guess you'd hear 1,000 very similar renditions of that story.
    Juggling all of this leaves me almost no time for shopping, any 
kind of shopping. I am almost embarrassed to admit how often I run out 
of basic supplies at home. So, the opportunity to purchase cough syrup, 
ibuprofen, Band-Aids, tissues, vitamins, hairspray, or my favorite 
shade of nail polish--without long lines, crowded aisles, slow 
cashiers, and parking hassles--is a dream come true. For me, it's a 
luxury that translates into one more hour of quality time with my kids. 
And dragging them to stores is not pleasant for the kids, for me, or 
for anybody in that store.
    But also important to me is the good healthcare information that is 
provided on these sites. I am very skeptical of any drug--prescribed or 
over-the-counter--and am always a bit nervous about their possible side 
effects, particularly in my children's small bodies. I was thrilled to 
discover the wealth of detailed information available about 
prescription drugs through on-line pharmacies.
    In my family, we require some regular medication. On-line 
pharmacies will take my order and payment in minutes, deliver the 
prescription directly to my home, and even send me a reminder email 
that it's time to refill the prescription, now that's a Godsend.
    For years, I purchased prescription drugs from our local family 
pharmacy, conveniently located in the same building as our doctors' 
offices. And as a small business owner, I go out of my way to support 
small businesses. Unfortunately, now that our pharmacist is nearing 
retirement age and cutting back his hours, he's not as convenient 
anymore. To my chagrin, the age of personal service at pharmacies has 
passed. Because of negative experiences I have had with impersonal 
service and multiple incorrectly filled prescriptions at major chain 
pharmacies, I do not believe I am missing out on customer service by 
buying on-line.
    In fact, today's drug counters do not offer an opportunity for a 
private discussion between customers and the on-duty pharmacist. You 
can picture what I mean. You are down on the floor, looking up at the 
pharmacist and often shouting questions, letting the whole world know 
that your kids caught something from school, like whooping cough, or 
head lice, or something else that you don't really want to share.
    With some on-line pharmacies, I can even email questions directly 
to a pharmacist in the privacy of my home 24-hours, 7 days a week. Now 
that's service, and a convenience I need in my life.
    This is not to say I don't have reservations, and here's the 
flipside of the privacy issue. I am always cautious about on-line 
purchases and sometimes worry that I might expose myself to financial 
fraud, or that a company will sell my name and data on my buying habits 
to another firm. And of course, as a mother, I hope Congress can find a 
way to prevent children from buying inappropriate or illegal drugs over 
the Internet.
    Finally, cost. On-line pharmacies can offer products at reduced 
cost. As they become more accepted by consumers and health plans, their 
ability to offer products at competitive prices will increase. And that 
is good news for consumer--not to mention that more time for my family 
is priceless.
    Again, thank you for inviting me here today. Now I would love to 
answer any of your questions, so fire away.

    Mr. Upton. Maybe we should operate with the lights not on 
in the future. It worked pretty well.
    Mr. Michel.

                     TESTIMONY OF BOB MICHEL

    Mr. Michel. Good morning. My name is Bob Michel.
    Mr. Upton. If you could put the mike a little built closer, 
that would be terrific. It moves.
    Mr. Michel. Will that work?
    Mr. Upton. Better. No, no, just keep moving it a little 
closer.
    Mr. Michel. All right. Can you hear me now? Is it on or 
off? Can you hear me, sir?
    Good morning. My name is Bob Michel. Chairman Upton and 
members of the Commerce Subcommittee on Oversight and 
Investigations, thank you for the opportunity to appear before 
you today to testify on the importance and value of reputable 
Internet drugstores to senior citizens.
    On-line pharmacies provide senior citizens a source of low-
cost, easily available pharmaceutical products literally at 
their fingertips.
    I am 65 years old, semi-retired. I do management consulting 
work for a number of companies, and I am an active member of 
the Seniors Coalition, a 3 million member organization that 
supports legislation aimed at protecting the best interests of 
seniors in our country.
    I come before you today representing myself as an advocate 
for all senior citizens. It's been widely reported that seniors 
are the fastest growing segment of Internet users today. A 
survey last year by the Nielsen Media Research and CommerceNet 
found that 7.6 million Internet users are 50 years or older, 
making up about 15 percent of the Internet-using population in 
the United States and Canada.
    I have used the Internet for some time now, and I rely on 
the Internet for a number of e-commerce transactions. I 
understand you're holding this hearing today to discuss the 
safety of on-line pharmacies. Of course, I support public 
safety on the Internet. If someone is circumventing the law by 
distributing drugs without a valid prescription, it is likely 
they're already breaking an existing State or Federal law. My 
advice is, shut them down if they are unlicensed or illegally 
dispensing drugs over the Internet.
    However, I don't think you want to overcontrol or 
overregulate the on-line pharmacies who are performing a 
valuable, legitimate service to millions of Americans who can 
enjoy the convenience of turning on their computer and ordering 
medication that may otherwise be difficult to obtain.
    I am a cancer survivor. I'm on blood pressure medication. 
My wife is diabetic and requires daily doses of insulin. If my 
wife needs to go to a doctor on one side of town and then make 
a trip to a pharmacy on the other, it can make for a long, 
stressful day.
    Nowadays, my wife talks to her doctor regularly on the 
phone. He calls her prescription in to a local pharmacy. When 
we retire to the wilds, in the not-too-distant future, we 
intend to have her doctor and mine send our prescriptions to a 
legitimate, on-line pharmacy such as PlanetRx, Drugstore or 
Soma.com and receive the medication via mail.
    On-line pharmacies offer tremendous opportunities to make 
life easier for seniors, many of whom are feeble or unable to 
navigate about very easily, by allowing them to get their 
prescriptions filled electronically and mailed directly to 
them. I think on-line pharmacies could especially be helpful to 
seniors who live in rural areas where getting to the local 
pharmacy in the middle of winter can be very taxing and at 
times hazardous.
    Furthermore, my wife and I both love to travel, and when we 
do, we often carry a laptop. It would be great to be able to 
have our doctor write a prescription, fax it to our on-line 
pharmacy and then have the pharmacy deliver it to us anywhere 
in the world.
    I am watching the legislation Congress is working on to 
give seniors more accessible, affordable prescription drug 
benefits. I hope that on-line pharmacies are factored into the 
mix when the final legislation is enacted.
    Mr. Chairman and members of the subcommittee, I think you 
recognize that e-commerce is the new and exciting wave of the 
future. It should not be stymied by a well-intended but 
overzealous regulatory system. Please don't inhibit legitimate 
on-line pharmacies from effectively complementing or even 
competing with storefront pharmacies in this country.
    Thank you for allowing me to express my views.
    [The prepared statement of Bob Michel follows:]
                    Prepared Statement of Bob Michel
    Good morning. My name is Bob Michel.
    Chairman Upton and members of Committee on Commerce Subcommittee on 
Oversight and Investigations, thank you for the opportunity to appear 
before you today to testify on the importance and value of safe 
Internet drugstores. Online pharmacies provide senior citizens low 
cost, easily available pharmaceutical products at their fingertips.
    I am 65 years old and semi-retired. I do management consulting work 
for a number of companies. I am an active member of the Seniors 
Coalition, which is a 3 million-member organization that supports 
legislation aimed protecting the best interest of seniors in the United 
States.
    I come before you today representing myself as an advocate for all 
senior citizens. It has been widely reported that senior citizens are 
the fastest growing element of Internet users. A survey last year by 
Nielsen Media Research and CommerceNet found that 7.6 million Internet 
users are 50 or older, making up about 15 percent of the Internet-using 
population in the United States and Canada.
    I have used the Internet for five years now and I rely on the 
Internet for a number of e-commerce transactions.
    I understand you are holding this hearing today to discuss the 
safety of online pharmacies. I support public safety on the Internet. 
My opinion is that if someone is breaking the law by distributing drugs 
without a prescription, it is likely they are already breaking an 
existing state and or federal law. My advice is to arrest them if they 
are illegally dispensing drugs over the Internet.
    However I don't think you want to overcontrol or regulate the 
online pharmacies who are performing an valuable service to millions of 
Americans who can enjoy the convenience of turning on their computer 
and ordering medication that may otherwise take them all day to order.
    I am a cancer survivor and I need to take blood pressure 
medication. My wife is diabetic and requires daily doses of insulin. If 
my wife needs to go to her doctor on one side of town and then make a 
trip to the pharmacy on the other side of town, it can make for a 
stressful day. Nowadays, my wife talks to her doctor regularly on the 
phone and he calls in her prescription to the pharmacy. It would be so 
much easier if she can have her doctor send in her prescription to a 
legitimate online pharmacy like PlanetRx.com or Drugstore.com. or 
Soma.com.
    Online pharmacies are a terrific opportunity to make life easier 
for senior citizens by allowing them to get their prescriptions filled 
electronically. I would think online pharmacies could especially help 
senior citizens who live rural areas where getting to the local 
pharmacy in the middle of winter can be very taxing.
    Furthermore, my wife and I both love to travel and when we do, we 
always carry a laptop computer. It would be great to be able to have 
our doctor write a prescription, fax it to our online pharmacy and then 
have the pharmacy deliver it to us anywhere in the world.
    I am watching the legislation Congress is working on to give 
seniors more accessible prescription drug benefits. I hope that online 
pharmacies are figured into the mix when the final legislation is 
enacted providing low-cost prescription drugs to senior citizens.
    Mr. Chairman, members of the Subcommittee on Oversight and 
Investigations, thank you allowing me to express my views that e-
commerce is the new and exciting wave of the future and should not be 
stymied by a regulatory regime. Please don't try and stop legitimate 
online pharmacies from competing with other pharmacies in this country.
    At this time, I am prepared to answer any questions you may have.

    Mr. Upton. Thank you.
    Ms. Egan.

                     TESTIMONY OF KATHY EGAN

    Ms. Egan. Good morning. I'm Kathy Egan from NBC10 in 
Philadelphia. I want to thank you, Mr. Chairman and members of 
the subcommittee, for allowing me to appear today. We were 
asked to share what our investigation uncovered.
    Most of us know the Internet has the potential for great 
things. It can educate, make life easier and be a great tool to 
exchange ideas. But our NBC10 investigation also revealed it 
can allow people access to dangerous prescription drugs without 
a prescription.
    Our 2-month investigation shows the Internet has become the 
1990's version of the wild, wild west. Anything goes. You can 
find a Web site that will sell you almost anything. Last year, 
the Internet economy generated an estimated $301 billion in 
U.S. Revenue, according to a University of Texas study. Many 
people today turn to the Internet like they used to turn to 
their mom and pop corner store as the place to buy things. One 
study estimates 56 percent of U.S. Companies will sell their 
products on-line by the year 2000. With consumers spending more 
on drugs per year than on books, CDs and videos combined, it is 
easy to see why prescription drug Web sites are growing in 
popularity.
    We had absolutely no problem finding Web site after Web 
site that would sell us a virtual candy store of prescription 
drugs like Viagra and Prozac. Worse yet, many of these sites 
required no prescription and very little prescreening, if any, 
to weed out people who don't need the drugs. In many cases, the 
most crucial information you need to give is your credit card 
number.
    In researching and producing our story, it was difficult to 
discern who is actually regulating these Internet drug 
companies. We called the U.S. Food and Drug Administration, the 
Federal Trade Commission, U.S. Customs, the Pharmaceutical 
Manufacturers Association, other national pharmacy groups and 
the State boards of pharmacy in our tri-state area. Since we 
also purchased a controlled substance, we called the U.S. Drug 
Enforcement Agency. Virtually every agency we talked to said 
they were interested in the problem, but they referred us to 
another group or agency. What's more, one government official 
told us no agency is up to speed on this problem.
    As you know, this is not an issue to be taken lightly. More 
and more people are gaining access to the Internet. One study 
says that seven new people get on the Internet every second. To 
give you an idea, that means that in the time it takes me to 
testify it means nearly 2,000 people have become Internet 
subscribers for the first time.
    Once more, the group that's most Internet savvy is the 
younger generation, our children. They know how to surf the 
net, where the sites are and how to work the system.
    To give you an example, recently in Philadelphia in a 
suburb there, teens from Conestoga High School were 
hospitalized after ingesting a drug ingredient purchased on the 
Internet. The drug DMX, dextro-meth-orphan, is the ingredient 
that stops the cough in cough syrup. This shows how children 
can get access to dangerous drugs and drug ingredients.
    In our NBC10 report, we showed even a 7-year-old buying a 
prescription diet drug that wasn't yet approved in the United 
States, no questions asked. We are going to show you that in 
just a minute, but we also want to tell you what kinds of 
responses we got when we confronted some of the Internet drug 
companies. One company squarely put the burden on the consumer, 
saying people need to educate themselves on the medication they 
are taking. Another company just flat out denied they even sold 
prescription drugs to us, and we found this company didn't have 
a license to sell in the U.S.
    In summary, some experts we've spoken to say Internet 
companies selling prescription drugs without prescriptions are 
light years ahead of the regulatory agencies, and they fear if 
something isn't done soon Americans may overdose, improperly 
use or suffer drug interactions that could injure or even kill 
them.
    Again, thank you for letting me to testify today, and we'd 
like to show you an excerpt of our News 10 investigation.
    [Video played.]
    [The prepared statement of Kathy Egan follows:]
        Prepared Statement of Kathy Egan, NBC/WCAU Philadelphia
    Thank you, Congressman Klink, and members of the subcommittee, for 
allowing me to appear today. We were asked to share what our NBC 10 
investigation uncovered. Most of us know the Internet has the potential 
for great things. It can educate, make life easier, and be a great tool 
to exchange ideas. But our NBC10 investigation also revealed, it can 
allow people access to dangerous prescription drugs when they shouldn't 
be able to get them.
    Our 2-month investigation shows the Internet has become the 1990's 
version of the wild, Wild West. Anything goes! You can find a website 
that will sell you almost anything. Last year, the Internet economy 
generated an estimated 301.4 Billion dollars in U.S. revenue according 
to a University of Texas study. Many people, today, turn to the 
Internet like they used to turn to their Mom and Pop corner store as 
the place to buy things. One study says an estimated 56 percent of U.S. 
companies will sell their products on-line by the year 2000. With 
consumers spending more on drugs per year than they do on books, CDs, 
and videos combined, it's easy to see why prescription drug websites 
are growing in popularity.
    We had absolutely no problem, finding website after website, after 
website that would sell us a virtual candy store of powerful 
prescription drugs like Viagra and Prozac. Worse yet, many of these 
sites required very little prescreening, if any, to weed out people who 
don't need the drugs. In many cases, the most crucial information you 
need to give is your credit card number.
    In researching and producing our story, it was difficult to discern 
WHO is actually regulating these internet drug companies. We called the 
U.S. Food and Drug Administration, the Federal Trade Commission, the 
Pharmaceutical Manufacturers Association, Other National Pharmacy 
groups, and the state boards of pharmacy in our tristate area. Since we 
also purchased a controlled substance, we called the U.S. Drug 
Enforcement Agency. Virtually every agency we talked said they were 
interested in the problem but referred us to another agency or group. 
What's more, one government official told us NO agency is up to speed 
on this problem.
    As you know this isn't an issue to be taken lightly. More and more 
people are gaining access to the Internet. In fact, one published 
estimate says 7 new people get on the Internet every second. To give 
you an idea that means in the time it takes me to testify nearly 2,000 
people have become Internet subscribers for the first time. What's 
more, the group that's most Internet savvy is the younger generation, 
our children. They know how to surf the net, where the sites are, and 
how to work the system.
    To give you an example: Recently in a Philadelphia suburb, teens 
from Conestoga High School were hospitalized after ingesting a drug 
ingredient purchased on the Internet. The drug, dextromethorphan, is 
the ingredient that stops the cough in cough syrups. This shows how 
children can get access to dangerous drugs and drug ingredients.
    In our NBC 10 report, we showed even a 7-year-old buying a 
prescription diet drug that wasn't approved yet in the United States. 
No questions asked. We'll show you that in a moment. But we also want 
to tell you what kind of responses we got when we confronted some of 
the internet drug companies. One company squarely put the burden on the 
consumer, saying people need to educate themselves on the medication 
they're taking. Another company just flat out denied they sold 
prescription drugs to us, and we found this company didn't have a 
license to sell in the U.S.
    In summary, some experts we've spoken to say Internet companies 
selling prescription drugs are light years ahead of the regulatory 
agencies. And they fear if something isn't done soon, Americans may 
overdose, improperly use, or suffer drug interactions that could injure 
or even kill them.
    Thank you again for the opportunity to speak to you today. Let's go 
ahead now and show you an excerpt of our NBC10 investigation.

    Mr. Upton. Thank you for that report.
    Ms. Behrens.

                 TESTIMONY OF CHRISTINE BEHRENS

    Ms. Behrens. Good morning.
    My name is Christine Behrens. I am a reporter from WWMT-
News 3, which is a Grand Rapids-Kalamazoo television station in 
Michigan.
    In February of this year, we did a series of investigative 
reports on Internet pharmacies. The reports were entitled, 
Prescription for Danger. We tested a number of Web sites that 
had been advertising prescriptions for the anti-impotence drug 
Viagra. Many of the advertisements said, ``No prescription, no 
problem'', and we found that it wasn't a problem, and I'd like 
to go ahead and show the tape.
    [Video played.]
    Ms. Behrens. Thank you.
    Mr. Upton. Just glad you spelled Fred with a PH.
    [The prepared statement of Christine Behrens follows:]
     Prepared Statement of Christine Behrens, WWMT News 3 Reporter
    In February of this year WWMT-News 3, a Grand Rapids-Kalamazoo, 
Michigan television station, did a series of investigative reports on 
Internet Pharmacies. The reports were titled ``RX for Danger.'' We 
tested a number of web sites that had been advertising prescriptions 
for the anti-impotence drug Viagra.
    The drug has become very popular since being introduced in the 
spring of 1998, perhaps one of the most popular drugs in America. But, 
it has also been linked to more than 120 deaths since it hit the 
market, most often occurring in men with heart disease. The drug 
carries warnings that it should not be used in conjunction with nitrate 
drugs, as combining the drugs could lower blood pressure to dangerous 
levels.
    Some of the Internet pharmacies tout how easy it is to get the 
drug. One site (http:kwikmed.com) advertises, ``No prescription, No 
problem?'' Another site (www.medservices.com) says, ``Viagra, from the 
privacy of your home or office. Next day delivery.'' We decided to find 
out if it really is easy to get an order filled.
    All of the web sites we tested post warning signs for heart disease 
victims, and many on line pharmacies ask prescription buyers list a 
health history and medications taken as part of the application. The 
application, which most on-line pharmacies refer to as an ``on-line 
consultation'' costs up to $85. The News 3 probe found pharmacists or 
doctors who review these consultations seem to be paying little 
attention to what the applicant/prescription buyer types in the blanks.
    In one case, we logged on to www.WorldExpressRx.com and filled out 
the ``On line consultation,'' on behalf of a cat named Tom. Tom's 
owner, honestly filled out Tom's medical history. The questionnaire 
asked about past surgeries. The answer that was typed in was 
``Neutered, 12/15/88.'' We indicated his weight was 15 and his height 
6. Tom's 10 pills of 100 mg. of Viagra were shipped after a charge of 
$167 was made to a family credit card. The lack of physician attention 
to the information listed suggests that no review was done at all.
    In a second case, a prescription application was made on behalf of 
a News-3 employee's dog, under the name of ``Phrederick L. Schnauzer.'' 
A similar reference was included in the application that the applicant 
had been neutered, but the web site did not question that. Instead, 
``Phrederick Schnauzer's'' application was turned down because he lives 
in the United States. The British firm ``CCNow cannot legally sell 
prescription drugs to customers who are in the U.S.'' stated a return 
e-mail to Phred's owner. The order was not processed and the credit 
card was not charged.
    In a third case, to again test the potential for on-line pharmacy 
abuse, a prescription was made on behalf of my dead grandfather, Jess 
Sprague whose date-of-birth was clearly stated May 6, 1900. Jess 
Sprague died 24 years ago. The order was placed with the Pill Box 
Pharmacy, based in San Antonio, Texas. With no question of the 
applicant's stated age, which would have been 98 years old had he been 
alive in February of this year, grandpa's Viagra arrived within two 
weeks.
    But perhaps the most alarming case involves a News-3 employee who 
truthfully filled out an application for a Viagra prescription 
including his detailed health history of heart trouble. Steve Kelso 
clearly listed his current prescription for a nitrate drug, one of 
those listed on the web site (www.WorldExpressRx.com) as a potential 
danger for a person using Viagra.
    ``I certainly thought that I would be denied Viagra, that given my 
condition, and given the medications I am on, it would seem totally 
contraindicated to prescribe me Viagra,'' said Kelso. But he got it 
within days after a charge was made to his credit card.
    Doctors and pharmacists we interviewed told us they were worried 
about the lack of face-to-face consultants with these types of 
operations. They are raising questions about who is evaluating the 
``on-line consultations,'' and writing and approving prescriptions.
    In addition, we also found that other popular prescription drugs 
are available from web sites; others the News-3 investigation 
discovered include the anti-histamine medication Claritin, and the hair 
growth pill Propecia, as well as several weight loss drugs.
                                summary:
    In talking with state and federal agencies and lawmakers over who 
is responsible for regulating on-line prescription drug sales, we found 
there seems to be confusion. In fact, it doesn't seem to be against the 
law. And it is difficult to find out where many of these pharmacies 
originate.
    I am not advocating for or against on-line pharmacies. But, our 
investigation revealed some alarming facts and raised a number of 
questions. Is anyone reviewing the ``on-line consultations?'' Did 
anyone bother to read Steve Kelso's application, or any of the other 
applications we submitted? We provided glaring clues when filling out 
``on-line consultations.''
    We presented situations that obviously would not have been approved 
if there was a face-to-face doctor/patient consultation.

    Mr. Upton. Ms. Stovall.

               TESTIMONY OF HON. CARLA J. STOVALL

    Ms. Stovall. Thank you very much for the opportunity and 
the invitation to be here. What I would start off by saying is 
if the Internet is indeed perceived as the wild, wild west, 
then I think that Attorneys General offices, State regulatory 
agencies and Federal agencies are the Matt Dillon of the new 
frontier. Because we are armed with appropriate weapons to try 
to deal with this issue, just like we deal with other crimes 
that are committed in this country.
    There are certainly benefits to pharmacies being available 
on-line, and we heard from the first two conferees, and I 
certainly agree with that. There are some great benefits. But, 
obviously, stopping the illegal activity that we heard a lot 
about is what's important. We wouldn't wink and nod if somebody 
wrote their own prescription out and took it into the local 
downtown pharmacy to get it filled. Patients cannot write their 
own prescriptions, and yet what we see going on in the Internet 
is very much that same thing. So just like we would stop it 
from going on in our local communities physically, we would 
also try to stop it over the Internet.
    My office has engaged in some of the same sort of stings 
that you heard about from the first TV stations, so I won't 
belabor the way that it's so easy to have that happen. But, 
nonetheless, what we see happening is not physicians 
prescribing medications but simply orders for medication being 
filled, and there's a big difference in that.
    As you know, some drugs carry tremendous side effects and 
health consequences that someone who is knowledgeable, with the 
regard of those contraindicating factors, ought to be involved 
with performing.
    Viagra that we've heard a lot about from the TV stations is 
one of the most popular drugs apparently that's out there now, 
and yet between March and November, 1998, 130 men died while 
taking Viagra. Many of them had heart conditions that resulted 
in their death. That was cardiovascular incidents they call 
them. It's not been determined what part Viagra played in that, 
and I don't mean to suggest that, but, nonetheless, when 130 
people die by taking that particular medication, it's something 
that would cause us concern. The number of men who died taking 
Viagra is not listed on the Web sites that I have looked at 
that offer Viagra, nor is the fact that those 130 men that died 
ranged in age from 29 all the way up to 87. So those are what 
are our concerns.
    We filed in the Kansas Attorney General's office under 
consumer protection saying it's deceptive and unconscionable 
for prescription drugs to be given out over the Internet 
without a physician licensed in my State, without a pharmacy 
licensed in my State being involved in the process. We are 
armed with appropriate weapons we think to combat these 
Internet activities, just as we already have done with other 
kinds of consumer protection scams over the Internet, with 
gambling over the Internet, with pornography on Web sites as 
well.
    The State Attorneys General wouldn't want to see this area 
Federalized just because Internet companies do cross State 
boundaries. We think the growth of e-commerce, the good as well 
as the bad, that comes with that give Attorney General Offices, 
State regulatory agencies and Federal agencies the opportunity 
to work together in addition with the AMA, for example, as well 
as the National Association of Boards of Pharmacy. The pharmacy 
board has come out with, I'm sure you know, a kind of seal of 
approval that legitimate pharmacies could put on their Web 
sites. And while that's not certainly the full answer to the 
problem and I don't think the pharmacy association would tell 
you that it is, it's at least a step in the right direction.
    What I will recommend to colleagues of mine is that we 
encourage State legislatures to require a certain amount of 
information be disclosed on any web sites that are giving 
prescription medication. What was so difficult for us when we 
sued was trying to locate who it was that we were doing 
business with. And very much as Congressman Klink talked about, 
it's the identity of those people and their whereabouts that 
present problems. So we would require and ask that legislatures 
require current and accurate addresses of the corporate 
offices, of any of their affiliate offices, the identities of 
the principals involved and their locations, as well as 
information about what State the pharmacy and/or the doctors 
involved are located in.
    What we found is that there will be a Web site company with 
a particular incorporation status and then there will be the 
pharmacy company or the company that actually dispenses the 
drugs, and you've got many shelves to go through. So if all of 
that information was required to be on the Internet, we find 
that that would be most helpful.
    If there is Federal legislation that this committee comes 
forward with, we would hope that it would be a floor and not 
try to be a ceiling to preempt States from doing anything but 
to be able to allow us to work in the areas that we 
traditionally have done with the licensing and regulating of 
the practice of medicine and pharmacology, and we would want to 
continue to do that.
    There is one thing that we would like and that is, if we 
were able to have Federal authority, much like we have in the 
telemarketing area, which would allow, pursuant to the FTC 
rules, State Attorneys General to go to Federal court and get 
nationwide injunctive relief, that would be of use, I think, to 
the Federal Government as well as to all State governments. We 
can do that now, as I indicated, with the telemarketing rules 
and would find that helpful. Then one Attorney General in one 
action in Federal court could get the company to cease and 
desist doing business across the country, and that would be the 
fastest way we think to adequately protect consumers and 
constituents.
    I really thank you for the opportunity to be here and share 
what it is we have done in Kansas and what other States are 
doing as well. Missouri has filed similar suits, and I know 
other of my colleagues are getting ready to do that. So we have 
been involved, but I'm happy to answer questions that you might 
have.
    Thank you.
    [The prepared statement of Hon. Carla J. Stovall follows:]
    Prepared Statement of Carla J. Stovall, Kansas Attorney General
    Chairman Upton, Ranking Member Klink, members of the Subcommittee, 
thank you for the invitation to testify today and for your leadership 
on the important issues the Subcommittee is considering. Let me also 
thank Chairman Bliley and Ranking Member Dingell of the full Committee 
for taking part in this hearing and for your attention and concern 
about the issues involved.
    The Internet and the World Wide Web offer countless opportunities 
for Americans as we move into the 21st Century. In Kansas, we view the 
Internet as an important lifeline for rural America. We know that, 
through cyber technology, it will soon be possible to participate as 
fully in the global economy from Dodge City or Goodland as from New 
York or Los Angeles. Our state is soon to be the site of the largest 
distribution center for Amazon.com, and we are proud to be the home of 
Sprint, which is on the cutting edge of telecommunications technology. 
So we welcome the dawn of the Information Age and the burgeoning growth 
of ``e-commerce''.
    But we also know that the Internet brings with it new opportunities 
for old-fashioned lawlessness and fraud, and for repackaged challenges 
to States' rights. Law enforcement authorities around the country, both 
state and federal, are struggling to combat pornography, pyramid 
schemes, gambling, and a host of other ancient evils that have cropped 
up anew online. Investigating and prosecuting online offenders in all 
these areas raise new challenges for law enforcement. But two 
principles should always guide us: (first) an illegal act does not 
become legal merely because it is committed through the Internet, and 
(second) a state does not become powerless merely because a threat to 
the health and welfare of its citizens invades online rather than in 
person, by mail, or in some other traditional manner.
    Those are the principles that led the State of Kansas to challenge 
web site operators who are recklessly--and illegally--selling 
prescription-only drugs to Kansans via the Internet. And let me be very 
clear--our law enforcement actions are aimed at stopping the illegal 
Internet sale of drugs to Kansans, not at stopping online drug sales 
entirely. We have no quarrel with doctors who prescribe to Kansas 
patients who use the Internet, so long as those doctors are properly 
licensed by the State of Kansas and meet all substantive requirements 
for practicing in the State. And we have no objection to legitimate 
pharmacies that dispense prescription medications to Kansans using the 
Internet, so long as those pharmacies are properly registered with the 
State of Kansas and operate by the same standards as the drug store on 
Main Street standards designed to protect the health and welfare of our 
citizens.
    We do object strenuously to those who believe they can sell 
potentially dangerous drugs to our citizens, without complying with 
state laws, merely because they set up a web page. As a Kansas Board of 
Pharmacy official said, the click of a mouse does not establish a 
physician-patient relationship.
    We have filed six lawsuits, naming as Defendants eight companies, 
six doctors and four other individuals. All of them participated in the 
sale of prescription drags to Kansans. None of them required any in-
person examination or consultation prior to prescribing and dispensing 
those drugs. Some of them sold ``lifestyle'' drugs, such as Viagra, to 
minors without any apparent hesitation. None of these Defendants is 
properly licensed or registered in the State of Kansas.
    I have submitted with my testimony a summary of this pending 
litigation filed by the State of Kansas, and I would ask that this 
summary be included in the hearing record.
    The theory of our cases is simple: By prescribing drugs to Kansans, 
certain Defendants practiced medicine in our state without the required 
legal authority. By dispensing drugs to Kansans, certain Defendants 
practiced pharmacy in our state without the required legal authority. 
And by recklessly dispensing drugs without any doctor-patient 
relationship whatsoever, while failing to disclose to consumers 
material information such as health risks associated with use of some 
of these drugs, all of the defendants committed deceptive and 
unconscionable acts in violation of our Consumer Protection Act.
    Will we win these cases? We certainly think so! There are tough 
problems, such as overcoming jurisdictional challenges and locating 
elusive Defendants using multiple shell corporations and mail drops. 
But we are confident our basic approach is sound, and we are confident 
the Courts will continue to apply Kansas law to protect Kansans within 
our State!
    And make no mistake about it--this is very much about protecting 
the health and welfare of Kansas citizens. Many of these medications 
have potentially serious side effects. If used improperly, many of them 
can kill. We would not even consider repealing our State laws that 
establish standards for dispensing dangerous medications within the 
State, and there is no reason to accept a lesser standard when 
dangerous drugs are sold to our citizens online. In fact, this issue 
first came to our attention when physicians in our state expressed 
concern that patients under their care could receive prescription drugs 
without the treating physician's knowledge, increasing the risk of 
inadvertent drug interactions.
    Kansas is in front on this issue, but we are not alone. I know my 
colleagues in other states are increasingly active in opposing illegal 
Internet drug sales. I believe a united, coordinated effort among 
states will serve us well in this matter.
    We welcome Federal involvement as well, although the solution is 
not to ``federalize'' this problem. States historically have had a 
dominant role in regulating doctors and pharmacies for the protection 
of local citizens. We should strengthen, not diminish, that role.
    To that end, I believe states should explore the possibility of 
establishing disclosure requirements for entities that sell 
prescription medications across state borders. One of the most 
difficult challenges in the Kansas prosecutions has been finding the 
companies and people responsible for selling into our State. We have 
had to sort through multiple shell corporations, addresses that turned 
out to be mail drops, overlapping addresses shared by different 
entities, and similar evasive tactics. I believe companies selling 
dangerous drugs across state lines should be required to maintain 
current, accurate, accessible information about their principals, their 
physical addresses, and their identities. We should not have to 
struggle to find them.
    To the extent new federal legislation is considered, I hope you 
will keep in mind two important principles:
    First, any federal requirements should be only a floor, not a 
ceiling. Do not preempt the States. Allow us to continue to set 
substantive requirements for the regulation of doctors and pharmacies 
that operate within our borders, and let us continue to have tougher 
requirements than the federal government as we see fit.
    Second, any new federal enforcement scheme should retain states as 
key actors. I know there is discussion of a regime modeled on the FTC's 
Telemarketing Sales Rule that would allow state Attorneys General to 
take action in federal court to curb illegal online pharmacies and to 
obtain nationwide injunctive relief. I believe there is a certain 
appeal in this, and NAAG certainly has no objection.
    Each of these ideas may help. But, ultimately, the answer to this 
problem will not be to reinvent the wheel. Each jurisdiction in this 
country, including the federal government, has requirements in place to 
ensure that dangerous drugs are dispensed safely. We do not need new 
standards. Rather, we need new cooperation among states, and with 
federal agencies, to ensure that our existing standards are followed 
and applied to Internet sales.
    That is the effort we in Kansas are trying to lead. That is the 
effort that the National Association of Attorneys General supports. And 
that is the effort that, I hope, the Congress will help us to continue.
    Thank you.

    Mr. Upton. Thank you very much.
    We will try this timer again. No, I give up.
    Okay, we are going to recognize members for 5 minutes for 
questioning, and I will give a little tap of the gavel when 
that occurs.
    First of all, I very much appreciate all of your testimony. 
Clearly, as I think was given in many of the opening 
statements, it is a double-edged sword. There are many 
positives, as Mr. Michel--by the way, I hope you retire to 
Michigan; it is a great State--but obviously many, many 
positives, but there are negatives as well.
    Ms. Stovall, I know that there is an association of 
attorneys generals, and I don't know if this has been a topic 
at some of the meetings--national meetings that you have had. 
Has that been the case and what interaction have you had with 
other attorneys generals across the country?
    Ms. Stovall. We met just recently in June in Nashville and 
talked about this issue. It has been an issue that has been 
discussed within our organization even prior to that but not on 
quite as formal a basis. I can assure you there is great 
interest with attorneys general on this issue, and I think we 
will see additional action within days, I think more lawsuits 
will be filed by attorneys general.
    Mr. Upton. You indicated in Kansas that you have filed I 
think six complaints, is that right? Are you planning to do 
more?
    Ms. Stovall. We filed six actual lawsuits. We don't frankly 
at this point intend to do more because of limited resources. 
And it is really not any shortage of law enforcement ability 
that is our problem, it is the shortage of resources to shut 
these down. So that is our difficulty.
    Mr. Upton. Have any of those six cases culminated in a 
final decision? Are they all pending?
    Ms. Stovall. They are still all pending. We have had 
service on almost all of the defendants we have sued, but many 
of those companies we sued now have an indicator on their web 
site if you are from Kansas, don't call us, because they will 
now no longer sell to Kansas citizens. So that was the relief, 
frankly, we were after. So although we are a long way from 
final disposition, the immediate relief is granted.
    Mr. Upton. I know as we have looked over much of the 
information our staffs were able to complete, one of the big 
problems with the Internet is that you could live in Michigan, 
the on-line situation could be in Florida, as was indicated in 
Ms. Egan's testimony, with the particular suite or P.O. Box 
there, and often if you have--in some cases where they do have 
you sort of walk through a checklist of physicians to make sure 
that they are adequately reviewed, we found one case where 
actually the physician was licensed in Mexico and did not have 
a U.S. License.
    As Ms. Egan's report indicated, as they tried to talk to 
who can be responsible for this, and they talked with the FDA, 
Customs, DOJ, State boards, DEA, pharmaceutical boards, and her 
testimony through the video was that no agency was up to speed. 
Have you witnessed that same problem? Are you getting 
cooperation from Federal agencies in terms of who ought to have 
the lead?
    Ms. Stovall. Certainly there has been cooperation, and 
State Attorneys General are not looking for the Federal 
agencies to take the lead at all. We appreciate the assistance 
that they have given us when requested on this and other 
issues.
    But even right now, when we talk about the Internet, we 
talk about the physical drugstore on Main Street, there isn't 
any one agency now that is responsible for all the business 
that goes on there or at a doctor's office. So I don't know 
that we would be correct in assuming that there should only be 
one agency now that regulates the prescriptions as well as the 
dispensing of them, just because it is on the Internet.
    Mr. Upton. For Ms. Behrens and Ms. Egan, what kind of 
reaction or follow up have you had since your program aired and 
have you had any further thoughts about investigating a variety 
of things and what are the positives you have seen as well?
    Ms. Behrens. Well, the reaction we got from people at the 
local State and Federal level was similar to what she was 
saying here, that they are not really sure whose jurisdiction 
it is, but they are aware of the problem, and they are trying 
to get a handle on it.
    As far as any follow-up, we--Tom the Cat received E-mails 
checking to see how he was doing with his Viagra and asking if 
he needed more.
    As far as checking into any other drugs, we talked about 
Zenecal, and I know that some of the State officials in 
Michigan were concerned a lot more about the weight loss drugs 
because of the danger.
    Ms. Egan. I know the DEA told me they wanted to look into 
this problem. They were really concerned about it, but they 
felt like the Internet is just so far ahead of them at this 
point that they are trying to figure it out, that the laws are 
in place is what I was told, but they just need to be able to 
catch up with the people that are selling drugs on the Internet 
without a prescription.
    I want to stress the ``without a prescription'' also. 
Because we didn't look at prescription drugs with a 
prescription.
    Mr. Upton. Thank you.
    Mr. Klink.
    Mr. Klink. I just thought I would let the bells finish 
ringing, Mr. Chairman.
    First of all, Mr. Chairman, this has been a very 
enlightening hearing. I want to thank you.
    Before I start, I just wanted to identify the gentleman who 
has joined us up here, our dear colleague, the Honorable Robert 
Brady from Philadelphia. Bob is on the Small Business 
Committee. In fact, he has been working with us on this issue; 
and he asked if he could come in and observe the hearing today. 
I thank you for the courtesy of allowing him to serve.
    I would ask unanimous consent if my friend, who has been 
working on some legislation on this matter with us, could have 
30 seconds to welcome his constituent, Ms. Egan from 
Philadelphia.
    Mr. Upton. Without objection.
    Mr. Brady. Thank you, Mr. Chairman. Thank you ranking 
member, my dear friend from Pennsylvania.
    I just wanted to welcome Ms. Kathy Egan to our 
congressional hearing. It is a unique situation where an 
elected official and a politician from the city of Philadelphia 
welcomes somebody from the news media. I don't want to miss 
that opportunity. But she is a unique lady, and I just wanted 
to thank her for publicizing this problem, doing all you are 
doing and thank you for your tireless efforts in dealing with 
this problem. I wanted you to know myself and anybody else I 
can convince--I don't think I need much convincing to assist 
you in any effort you can take to rectify this.
    I thank you, and I welcome you here.
    And I thank you, Mr. Chairman, and thank the committee for 
your indulgence.
    Mr. Klink. Mr. Chairman, I will tell you this. What I 
appreciate about Mr. Brady's efforts in this matter--he is on 
the Small Business Committee. About a month ago, this issue 
came up, and so they began to look at this themselves within 
the Small Business Committee. He told me the interest he had, 
but he automatically realized that we in the Commerce Committee 
could do so much more. I thought that was very enlightening.
    Mr. Upton. That is true. I suggest the Judiciary Committee 
be removed.
    Mr. Klink. So, at this point, I am happy that he has worked 
with us on this issue. It is nice when we can work across our 
jurisdictions together.
    Ms. Egan, you know, you mentioned in your testimony that 
there was virtual candy stores. I remember that being in your 
report. Would it surprise you if some of the web sites out 
there apparently are willing to sell on-line drugs like 
Comprageisic and Codipront, both highly addictive painkillers, 
by answering a medical questionnaire and submitting credit card 
numbers? Does that at all surprise you?
    Ms. Egan. That doesn't surprise me, based on what we saw. 
All we had to put in on a number of these drugs was name, 
address and credit card. I put in I worked at NBC10 in 
Philadelphia, and we got the stuff Fed-Ex'd right to our door, 
and it was no problem. Left at our door, I might add, where 
anybody could pick it up. They didn't make sure someone was 
there to get it. It raises another concern. I have two little 
kids, and that raises a concern as far as that is concerned.
    Mr. Klink. Anybody could have picked it up?
    Ms. Egan. It was left right outside the door.
    Mr. Klink. I was looking at another news article here, and 
the reason I mentioned Codipront and Comprageisic, there was a 
news report from a month or so ago, U.S. News and World Report. 
It says, both of these drugs sent by Pharma Group contained 
codeine, a narcotic painkiller, and are on DEA's list of most 
addictive medication. ``if you went to the post office to pick 
these up,'' a spokesperson said, ``it is not inconceivable that 
the DEA could put you in jail.'' that is how serious it is. Yet 
things like this are dropped on people's door step every day.
    I think it is important, and I know it is very difficult, 
and I apologize, but what we have done is blown up some charts 
of some of the pain relievers. I am going to read through some 
of the names, those I can pronounce. I don't know a lot of 
these things. I am not a pharmacist.
    Too often, we dwell on things like Senecal, Viagra, and 
they are the most prevalent, but they are indeed not the only 
kinds of medications. So we are not picking on any 
manufacturer. We are not picking on any particular drug. But 
there are things like Fiorinal Codeina, Codeisan, Perduretas de 
C., Termalgin, Codipront, Darvon, and it goes on and on and on. 
So the list of drugs, and it really does read like a virtual 
candy store of narcotics, could cause a lot of problems.
    So let me ask both Ms. Behrens and Ms. Egan, I imagine both 
of you talked to a number of State and Federal regulatory 
officials about the kind of drugs you were able to access when 
you were doing your reports. Could each of you elaborate a 
little further on what the response was by those agencies? I 
take it that you didn't feel those agencies really had their 
act together and that they were able to communicate to you and 
the news media, and you are the ones going to be telling the 
public what is going on, that they really had come to grips 
with how they could control these controlled substances.
    Let me start with Ms. Behrens.
    Ms. Behrens. That is exactly the response we got. We talked 
with someone from the Department of Consumer and Industry 
Health Services in Michigan, and they seemed to have the best 
grip on it. But they were focusing more, like you were saying, 
on the drugs that were narcotics, that they were concerned that 
people may be able to get narcotics. What we focused on was 
Viagra and didn't test any other drugs in our series. But when 
we talked with some State officials, that was the concern a 
little bit more than the narcotic drugs that might be 
available.
    Mr. Klink. I think the committee has found the same thing.
    Ms. Egan?
    Ms. Egan. The agencies we talked to were definitely 
concerned, but they didn't seem to have anything in place to go 
after right then and there. They didn't seem to be up to speed 
on it, as I had said. The FDA gave us a news release from 1992 
talking about mail order drugs when we brought this to their 
attention. So I just--we couldn't find anybody who said yes, 
this is who is in charge, this is what we are doing about it, 
this is what needs to be done. They said it was just such a new 
problem that nobody knows.
    Mr. Klink. Some have argued that the on-line pharmacy 
industry should be able to be self-regulating. Let me ask first 
Ms. Stovall and then each of the reporters your opinion of 
that. Have you seen evidence that they would be able to be 
self-regulating?
    Ms. Stovall. Absolutely not. We wouldn't want that any more 
than we would like regulation lifted on pharmacies that are on 
Main Street or physicians on Main Street. Regulation needs to 
happen in the way that we do now, but not just to regulate 
through the Internet.
    Mr. Klink. Reporters?
    Ms. Behrens. Well, I interviewed someone from one of the 
on-line pharmacists and that was exactly his opinion, is that 
they can self-regulate.
    When I said, but how are you prescribing to--why are you 
prescribing to a dead man? He said, that shouldn't have got by. 
I don't know how that got by.
    I asked him, what would be your concern if a teenager 
ordered Viagra or any other drug over the Internet? And his 
response was, teenagers don't have credit cards. My response to 
him was, my grandfather didn't have a credit card either.
    As far as an opinion on--obviously, from our report it 
simply--there are no regulations. But I am not here to give an 
opinion on whether there should be or shouldn't be.
    Ms. Egan. Likewise, I can't give an opinion either, but I 
feel that from what we found and the experts we talked to, that 
the biggest problem was without a prescription and that it was 
getting into the hands of children, and that the experts we 
talked to had a real problem with that, with the danger that is 
involved with so many kids able to get on the Internet. It is 
so easy for them to do this, and it was so easy for us to do 
this.
    Mr. Klink. Mr. Chairman, I see the red light, but I would 
point out, of the 200 sites we found and with the 400 sites 
that we are being told by the National Boards of Pharmacy are 
out there, there is no sign that any of these sites--that few 
of them, anyhow, have done any kind of self-regulation. So I 
think we need to look further into this.
    I yield back my time.
    Mr. Upton. Thank you.
    I would note that my dad used to be in charge of consumer 
affairs for Whirlpool and helped develop the first 800 number; 
and the first question on the checklist when something was 
wrong was, is it plugged in? And it is now plugged in.
    I recognize Mr. Bryant.
    Mr. Bryant. Thank you, Mr. Chairman. I think we have an 
outstanding panel here, and I appreciate the contribution you 
have all made.
    Ms. Stovall, good to see you again today on another matter.
    I think it was mentioned maybe in the testimony of Ms. Yui 
or Mr. Michel, one, that we have to be careful and remember in 
going through all this very important debate that there is a 
difference between using an on-line pharmacy to fill a 
prescription legitimately and the misuse of the system through 
illegally using that system to dispense drugs, legal drugs, 
over the Internet. I think it is important that we remember 
that. Because I think, for the most part, the people involved 
in this are honest and legitimate. But, again, it is the 
minority out there that are doing bad things and that are 
making a lot of money. And certainly profit is why they are out 
there in any illegal trade, whether it is this type of trade or 
anything else.
    Ms. Stovall, I think you suggest some good ideas, and I am 
particularly intrigued by the thought of some sort of seal of 
approval that would be on the site. Then I thought, well, of 
course, they could make one up and counterfeit that very 
quickly. But that would have to tie hand in hand with some type 
of State registration, with numbers and locations where people, 
real people, can be identified and found, and periodically 
these things could work together in some sort of network, I 
would think, that could give us a little better assurance.
    Ms. Stovall. I think that is exactly right, Congressman, 
and that is what we would advocate.
    Right now, there can be a pharmacy in the neighboring State 
of Missouri, for example, that is licensed to do business in my 
State, and that can be lawful. But they do have to be licensed, 
have to be approved by the Kansas Board of Pharmacies. So 
pharmacies in other places that are selling over the Internet 
can indeed be lawfully engaging in business, but they have got 
to register, got to give that information that you have talked 
about. So I think you are right. They can partner really well.
    Mr. Bryant. I think to the extent we are talking about 
drugs that are regulated when they are sold in pharmacies in 
States by the States, that as much as we can, without 
interfering with the flow of commerce, replicate that on the 
Internet for things like drugs--I am not talking about you have 
to get licenses for everything you sell over the Internet. But 
I think in an area as important as this, we have to do that.
    You mentioned you feel like, as a State Attorney General, 
you are armed sufficiently right now, but you suggest perhaps 
some way to better assist you in working interstate, with other 
States. Would something in the nature of a uniform act maybe 
giving State attorneys generals the ability to work together 
across State lines--would a uniform act or something like 
that----
    Ms. Stovall. I don't know that we even need to go that far. 
I think, for the most part, attorneys general are pretty 
satisfied with their own commercial codes or their own consumer 
protection codes rather that they deal with now for non-
Internet kinds of fraud. So those tools can apply.
    What I referenced was the ability for us just to be able to 
go to Federal Court, and if I were to go to Federal Court in 
Kansas City and get an injunction against a company that was 
doing business in my State but in 30 other States, we would be 
able to enjoin them by that one action and stop them from 
distributing the drugs. So that would be more of a help in my 
view than a model code. It doesn't mean there isn't some 
benefit to it, but it is not anything we have thought would be 
necessary.
    Mr. Bryant. Let me close my portion of this by stating 
that, in keeping this distinction out there between people who 
are legitimately and honestly doing business, I want to, with 
unanimous consent, introduce into the record a news release and 
two additional pages accompanying that news release from Pfizer 
Company, who everyone knows is a maker of Viagra and many other 
fine products, and also who has a distribution center in my 
district, by the way, what efforts they are making to work with 
the Federal agencies, the State agencies, such as Kansas, the 
professional associations, the pharmaceutical associations, as 
well as using the courts and litigation lawsuits to enforce 
trademarks and things like this, to assist in this effort. I 
would like to make that a part of the record.
    Again, I would commend all of the companies--all the 
legitimate companies out there who are working hard and 
together with other people working hard to solve this, what can 
be a very difficult problem. I yield back my time.
    Mr. Upton. Without objection, it will be made part of the 
record.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T8498.001
    
    [GRAPHIC] [TIFF OMITTED] T8498.002
    
    [GRAPHIC] [TIFF OMITTED] T8498.003
    
    Mr. Upton. Mr. Stupak from Michigan.
    Mr. Stupak. Thank you, Mr. Chairman.
    I apologize for being a few minutes late. I was at the 
Health and Environment Subcommittee. Senator Levin from 
Michigan, of course, testified there, so I had to be there. But 
I certainly enjoyed the tapes and the testimony of our 
witnesses.
    I am sure Pfizer and others are trying to do what they can 
to stop this, but, Mr. Chairman, if I may, it reminds me a 
little bit like Yogi Berra says, it is deja vu all over again. 
Here we go. I love Yogi Berra, but I don't like what is going 
on on the Internet.
    Go back, this subcommittee, a number of years ago, Mr. 
Chairman, and you were part of it, we spent years investigating 
the issues of drug counterfeiting and drug diversion; and those 
investigations ultimately led to the Prescription Drug 
Diversion Act under the leadership of John Dingell. And we had 
all these assurances it wasn't needed, yet we spent time 
investigating.
    Our investigation back then revealed that--all manner of 
dangerous activities that directly threatened the lives and 
health of all Americans, and that is what we have going on here 
today.
    All manner of prescription pills and tablets back then were 
removed from their required packaging and resold into a black 
market estimated to be about $500 million annually. Liquid 
prescription medicines were removed from their lawfully labeled 
packaging and sold in containers such as used pop bottles. In 
10 separate incidents substances were sold to Americans as 
prescription drugs that were simply counterfeit. The packaging 
was duplicated perfectly, but the drugs were not, just like we 
saw in Ms. Egan's tape. Two million fake birth control pills 
were sold in this country from overseas. Approximately half of 
those birth control pills contained no active ingredient 
whatsoever.
    In another case, thousand dose bottles of prescription pain 
reliever in packages and with labels indistinguishable from the 
real thing contained aspirin as the only active ingredient, 
endangering the lives of anyone with a fairly common allergy.
    Mr. Chairman, I don't want to see us do this, repeat the 
same mistakes that were made in the past. We are seeing it all 
over again, just a new forum for counterfeiting, for black 
marketing, for hoodwinking the American people.
    Mr. Chairman, we started this investigation in January. 
There were 26 web sites. There is close to 400 now. So from 
January, 26 to close to 400 right now.
    Everyone has come here and told basically their story, and 
I agree there may be some legitimate web sites out there, but 
of the 400, I can't think of more than two that we have found. 
So there is 398 out there still selling and trying to pull it 
over. As long as you have your credit card, you get what you 
want.
    So as we take a look at this, Mr. Chairman, I hope we don't 
make the same mistakes. I hope we go at this aggressively, and 
we really get at the crux of the problem.
    I guess as we listen to all this--I know, Ms. Yui, you are 
a very caring person and want to do what is right for your 
children and all that. You talk about buying on the Internet 
and the benefit. I agree there are some benefits there. But how 
do you determine whether you are getting safe drugs, legitimate 
drugs, for your children? How do you know that, if there are 
400 sites there?
    Ms. Yui. You don't know. I did say that I do rely quite a 
bit on the media. I do read quite a bit. And I would look for 
companies that have been covered by consumer reporters. I think 
it would be of great value to have some sort of Federal or 
State insignia or perhaps a society of doctors--a Federal 
society of doctors that would approve a site. I don't know if 
they would want to get into that liability issue.
    But I think with any product you buy over the Internet 
there is that risk that you run. You may not be with a 
legitimate site. And you need to hold off as a consumer and 
wait to see which are the sites that survive, which are the 
sites again that are covered by the press and which you hear 
about.
    Mr. Stupak. Have any of these companies you purchased from 
ever contacted you to make sure you are who you say you are and 
you have a prescription for the medicine?
    Ms. Yui. Unfortunately--and this is very new to me--my 
health care plan does not cover--does not allow me to purchase 
on-line and I would only do it for convenience. Until it is 
convenient for me, and I am also hoping through health care 
plans signing on to some of these sites or affiliating with 
some of these sites, that is my protection. If the health care 
plan says they are legitimate, they allow me, cover me, allow 
me to use my copay payment to pay on it, which is still rare, 
unfortunately, for consumers.
    Mr. Stupak. You have no way of knowing whether it is legit, 
what you are getting? They don't double-check with you?
    Ms. Yui. I would assume that if my health care plan has 
accepted the company, that they hopefully have done that for 
me, just like they have done with the doctor.
    Mr. Stupak. Well, do you order it, or does your health care 
plan order the drugs for you?
    Ms. Yui. That you order, but my doctors prescribed them. I 
would never order something that my doctor hasn't prescribed, 
just like I wouldn't at any----
    Mr. Stupak. How do you know what you are getting is what 
you ordered? How do you know what you are getting over the 
Internet is what you ordered, what your doctor prescribed? Do 
you have any way of knowing it is----
    Ms. Yui. I guess I would have no more way of knowing than 
if a major chain pharmacy or any pharmacy has put the right 
pills in the bottle. I am trusting. That is true. I think any 
consumer you have to assume--and it would be, as I said, be of 
great value to know--have something that alerts a consumer that 
the FDA or State regulatory body and also maybe some 
professional groups have checked out this site, they are 
legitimate, and I think that is true of probably any consumer 
product that is sold on-line.
    Mr. Klink. Would the gentleman yield one moment?
    The difference I think--Ms. Yui, you said you have no 
difference, no better way of knowing if it is a legitimate drug 
that you were prescribed than if you go to the corner pharmacy. 
The difference is the corner pharmacy has a license on the wall 
from the State, and they are inspected. These 400 sites on the 
web, there is no evidence that they have been licensed. There 
is no evidence that they have been inspected. We don't know 
where the drugs come from.
    So from the perspective of the corner pharmacy, we know who 
made the drugs. There has been a chain of custody and control 
of those medications. We don't know about that with the 
Internet pharmacy, because they are dropped off via the mail, 
UPS, Federal Express. We don't know where they came from. It is 
like they were dropped out of the sky. As Ms. Egan said, 
dropped on the porch. Anyone could grab them.
    Ms. Yui. That is what I said.
    I certainly appreciate that regulating this is a daunting 
task for Congress, for regulatory bodies. I don't know how you 
can do that. I don't know how you regulate Internet commerce. 
It is full of problems. But I did order--for instance, I was on 
a health care plan once that I was able to order prescription 
drugs through the mail, and it was wonderfully convenient.
    Mr. Stupak. From your health care plan?
    Ms. Yui. Yes.
    Mr. Stupak. Have you ever gone on the Internet and ordered?
    Ms. Yui. I have not been able to. My health care plan 
doesn't allow me to, and I am not going to pay out of pocket 
for it.
    Mr. Stupak. I agree----
    Ms. Yui. I have done research on the Internet, but, no, I 
haven't been able.
    Mr. Stupak. Some of these are great. Like this one here has 
a very nice-looking doctor here that really I would like to 
trust him, but you can't. There is not even a phone number on 
here to call this nice-looking doctor to see if you are getting 
what you want. How do you check it out?
    Ms. Yui. I wouldn't do business with that site. You have to 
be smart as a consumer. I would also talk to my doctor. I think 
doctors play a great role in this. I think doctors need to be 
educated about what is out there. And doctors can say to you, 
you know, this is a good site; this isn't a good site. I think 
there needs to be consumer public education and education of 
professionals.
    Mr. Stupak. You have got to be smart. Our reporters were 
very smart. They put down ``Cat,'' ``Dog,'' ``Dead Person'' and 
``person who shouldn't receive it,'' but the person filling on 
the other side sent it anyway. Once they got their money, they 
didn't care how smart, how trusting, or what your health 
condition was. All they wanted was your money.
    Ms. Yui. It is alarming. That is what I am saying. It is a 
big job. I don't know how do it. But there are definite 
benefits to this.
    Mr. Stupak. I agree.
    Ms. Yui. And the benefit is what we also need to protect.
    Mr. Stupak. I agree, and that is the dilemma we are in.
    Mr. Chairman, if I may, I know I said there are two 
legitimate sites that I have found. I understand there are 
probably more, but I can only think of two that I have found in 
cruising the net to get prepared for this hearing.
    Thank you for your indulgence, Mr. Chairman.
    Mr. Upton. Thank you. That is why we have the best and the 
brightest on this committee.
    Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman. I hope through the 
hard work of this committee we will be able to not only 
identify more legitimate sites but be able to develop more.
    One of the points that was brought up basically, I guess, 
by Kathy about the issue about no prescriptions, you know, 
personally if a dead man is getting drugs, you know, that is 
not my concern. At least we know it is not going to hurt him. 
My concern, though, is that you are talking about people 
gaining access to prescription drugs without a prescription. I 
am going to be really interested to hear from the third panel 
about how we want to justify that you can't go to the street 
corner, you can't go to the grocery store, you can't go to a 
pharmacy and purchase prescription drugs without a 
prescription. Do you want to make a comment about that?
    Ms. Stovall. To do that now would be illegal, just like to 
do it over the Internet without a prescription is illegal. So 
it is illegal. Laws are broken all the time. We know that. That 
is why we have law enforcement. That is what I want us to 
continue to focus on.
    Mr. Bilbray. You hit on the issue about the fact it is not 
so much we don't have the laws on the book. It is like 
everything else that technology has done in the last two 
decades. It is so far ahead of government, we just haven't 
figured out how to catch up yet.
    Ms. Stovall. The bad guys are always ahead of the good 
guys. Law enforcement is always catching up and cleaning up 
after they have committed crimes, and this area is no 
different, unfortunately.
    Mr. Bilbray. I think we need to admit, too, that the bad 
guys are intermixed with a whole lot of good guys sometimes, 
and so we definitely don't want to just line everybody up. That 
is one of the concerns I have, is when we get into this 
prescription issue--and I would just, you know, say this to ask 
the questions--are we going to reach a place to where consumers 
need scanners to be able to transmit prescriptions, to be able 
to communicate that they do have the prescription? How else are 
we going to do this?
    Ms. Stovall. I think either faxing it--if the patient has 
their prescription and they fax it to this on-line pharmacy who 
then calls the doctor's office to verify or the doctor's office 
just originally contacts your on-line pharmacy of choice to 
verify, I think that is what has to happen to make sure we are 
dealing with physicians licensed in the State and pharmacies 
licensed in the State.
    Mr. Bilbray. In California, there has been enforcement of 
physicians selling over the Internet. In fact, I know of 
physicians who have had their licenses temporarily revoked 
because they basically violated the physician responsibility of 
oversight, I guess is what it was. This is a new field of 
physicians saying, how much of the oversight do I do? I think 
the outrage is when you get people actually asking for 
information, like you did in your reports, and then ignoring 
the information, not using that in considering it. That should 
be at least--what a ridiculous thing, of asking the consumer to 
go through the whole rigmarole and then not consider it and 
throw it out.
    The question is, is that, when we go through this 
oversight, are States enforcing this segment universally to 
physicians who are using the Internet, or is it just a 
California-specific item you are hearing?
    Ms. Stovall. Absolutely not just specific in California. 
Many other States that have their healing arts board or their 
board that looks at physicians and regulates them have been 
involved in it.
    Mr. Bilbray. In monitoring the Internet.
    Ms. Stovall. I can't say monitoring the Internet as they 
look at all the sites. But when referrals are made or things 
come to their attention, most certainly administrative actions 
have been taken against physicians in more States than just 
California and my State of Kansas.
    Mr. Bilbray. California has so many public employees that 
we get them to do something every once in a while.
    Ms. Stovall. You have a lot of physicians, too, so there is 
a lot of opportunity there.
    I would say, if I could, AMA has very much spoken out 
against the practice you have talked about, prescriptions--just 
on-line prescribing medications for people they don't know, 
haven't seen and have no connection with. So the physicians 
themselves also are trying to police them as well.
    Mr. Bilbray. You know, I want--when we talk about a lot of 
these items, Mr. Chairman, I think we need to be careful as we 
use brand names, the perception of danger or whatever. I mean, 
Minoxidal used to be a prescription drug. There was a whole lot 
of cold medicines that used to be prescription drugs. We 
shouldn't perceive that a prescription drug is automatically 
dangerous and threatening. It is just many of them are going 
through a period before they become over the counter. So I 
think, in all fairness to a lot of these name drugs and 
treatments, that we are going to see a lot of things that was 
discussed here that are going to be over the counter.
    My big question is, when we get into this, and I am really 
speaking because other panels are coming up, this issue of how 
we do oversight, I really believe and I would ask law 
enforcement this, again and again and again, when we are 
talking about issues of child pornography being sold to young 
people, accession to the Internet and a lot of these other 
things, don't you agree that somewhere down the line we are 
going to have to develop user ID capabilities so we know that 
the person who is hitting that keyboard is actually the person 
who claims to be?
    Ms. Stovall. I won't go so far as to agree with that. But I 
would say that because of E-commerce and what is available, we 
do need to find, I think, some way to restrict age access to 
certain sites. Because we know young people buy alcohol, they 
buy prescription drugs, they get pornography, and that is a 
problem. I don't for a second pretend to have the technical 
capability to figure that out. You are right. We need to 
protect our young people.
    Mr. Bilbray. On our committee we are just working on the 
electronic signature stuff. That is all the technology we are 
looking at.
    I yield back, Mr. Chairman.
    Mr. Upton. Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman.
    Mr. Upton. You need to turn your microphone on.
    Ms. DeGette. Just like Ms. Egan, I have a 9-year-old 
daughter who likes to order things on the Internet, and in fact 
she just ordered the third Harry Potter book from England 
because you can't yet get it in the United States.
    I look at all of these scores of web sites that people can 
get drugs from, and it seems to me the problem is not really 
are you getting drugs from a P.O. Box in Florida. We can take 
care of that. The problem is, like this one, ``Viagra, no 
prescription needed for Viagra in Europe.'' It says here a 
doctor's prescription is recommended but not required to order 
Viagra, because, it says, if you do not have a prescription, we 
can refer you to one or more doctors who issue them on-line. 
That must be the dog and cat doctors who do it.
    Then here is another one, Pharma Group, issuing all kinds 
of things from Europe--antibiotics, antidepressants, including 
Prozac, on and on and on.
    So my question is to Ms. Stovall. What you are saying is we 
have the laws on the books and the States attorneys general can 
enforce them. What is the mechanism you see for the States to 
be able to enforce these laws against foreign companies, which 
I think is probably our biggest problem?
    Ms. Stovall. Again, not just State AG's but the regulatory 
agencies in States as well as the Federal agencies, too. It is 
just like when we deal with any other issues over the Internet 
or otherwise when the companies are not located within the 
continental United States. Getting them is difficult. There 
isn't any question when they are foreign companies about that. 
But what other kinds of laws can be initiated to help us, I 
don't know, because it is illegal now for them to do those 
things.
    Ms. DeGette. That goes to my next question. You say that 
you are enforcing your fraud laws, and that is good, and there 
may be some fraud involved. But if, for example, this Viagra 
company, if they actually claim to have doctors taking the 
medical history and issuing a prescription, then I don't quite 
understand how a fraud law would be broken in that case?
    Ms. Stovall. It is deceptive and unconscionable. It is 
deceptive because they say they have a physician who is going 
to provide you a prescription.
    Ms. DeGette. What if they do?
    Ms. Stovall. They are not doing it pursuant to medical 
standards, which is that you have an examination and you know 
the actual history of the patient.
    Ms. DeGette. Let me ask you this. Of the three cases you 
say you have pending right now----
    Ms. Stovall. Six.
    Ms. DeGette. Of the six cases you have pending, how many of 
those are involving overseas operations?
    Ms. Stovall. None of them that I am aware of.
    Ms. DeGette. That is going to be, I would think, an 
attorney general's problem, how do you find that person and 
bring them into your local jurisdiction--especially--well, it 
is worse with the Internet, because there is no place from 
which they sell these drugs. They are selling them over 
cyberspace. That is a law enforcement issue.
    Ms. Stovall. Mail order fraud is that way. Child 
pornography is that way. It is difficult when they are 
overseas, no question.
    Ms. DeGette. Let me follow up a little bit with our 
reporters, because a lot of the big issues we have got here 
seem to involve big-name-brand drugs--Viagra, other kinds of 
drugs like that. Let's start with Ms. Behrens. Pfizer makes 
Viagra. My question would be, assuming the cat and the dog and 
the dead person and everyone else are getting real Viagra, what 
is the responsibility of the pharmaceutical companies to work 
with these mail order places to restrict improper use of their 
product?
    Ms. Behrens. I interviewed someone from Pfizer, and the 
response I got was they are aware of the problem and concerned 
about the problem, but the answer I got wasn't really an 
answer. They were saying that they don't directly distribute to 
the pharmacies that are selling these. They distribute to 
someone in the middle, a warehouser, and then that is where the 
pharmacies are getting the Viagra.
    Ms. DeGette. Let me follow up with Ms. Egan. Do you think 
that the drug manufacturer should keep a closer control over 
where their products are going?
    Ms. Egan. I don't feel like I can really answer that. I 
talked to some people from Merck and some of the other drug 
companies. Likewise, like Christine said, they were very 
concerned, and they want to get a handle on this, too, is what 
they had told us. They are launching investigations as well. 
But I don't feel like I can answer that question.
    Ms. DeGette. Mr. Chairman, it might be useful at a future 
hearing to bring some of the drug manufacturers in and see if 
they can work collectively with us to try to resolve this 
really increasing problem.
    Mr. Upton. Good idea. Thank you.
    Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Ms. Stovall, I am assuming--I didn't hear your testimony, 
but I would assume two legal theories that you pursue are that, 
one, there is not a pharmacist licensed in the State of Kansas 
that would distribute--that would prescribe these medicines on 
the Internet; and, two, that the physician--I mean, that would 
not fill the prescriptions. Two, the physician is not licensed 
to practice medicine in Kansas. So those would be the two legal 
theories that you would pursue?
    Ms. Stovall. That is exactly right, Congressman. That is 
why we allege it is a violation, deceptive and unconscionable 
behavior for physicians and pharmacies not licensed in my State 
to give medication to patients.
    Mr. Whitfield. I assume the second big problem would be 
finding out who you are going to serve your papers on for legal 
suits. I did notice, just looking at part of your testimony, 
there has been one doctor that you have not been able to find, 
but you have been able to obtain temporary injunctions or 
restraining orders or something to prevent them from selling, 
is that right?
    Ms. Stovall. They have stopped selling into the State of 
Kansas, and we have enjoined them from doing that. Many of 
their web sites now say, if you are a Kansas patient, don't 
call us.
    Mr. Whitfield. I was reading an article not too long ago 
that there was a web site that came out of Bogota, Colombia, 
that was selling home abortion and female self-sterilization 
kits. The way the FDA determined they didn't have authority 
over this company was because it was out of Bogota, Colombia, 
but the Internet provider had a service contract that whoever 
sold over this web site had to meet all U.S. Laws, and in doing 
that they were able to stop them from selling by going to the 
provider.
    Have you all worked in that way?
    Ms. Stovall. We haven't had to go that way. We maintain we 
have got jurisdiction over any company that advertises in our 
State on the Internet, and that is the sufficient nexus with my 
State to get legal jurisdiction. So we haven't had to go as far 
as that. But we could, if needed.
    Mr. Whitfield. Ms. DeGette was talking about if it was a 
company doing business in Bogota, Colombia, how would you 
obtain process over them?
    Ms. Stovall. It would be very difficult to do it. But, 
nonetheless, it would be illegal for them to have a market the 
State of Kansas. So any time it is a foreign jurisdiction that 
presents problems. There is no question about that.
    Mr. Whitfield. I think you did indicate one thing that 
would be quite helpful, if there was at least some sort of 
Federal requirement of an address and principal parties 
involved so that you would always know who they are and where 
they could be located, at least theoretically.
    Ms. Stovall. Theoretically, and where they are licensed, 
what States they are licensed to practice medicine or 
pharmacology in, and whether it is a series of State or Federal 
requirements. Either way, we find that would be helpful.
    Mr. Whitfield. Right now I guess there is no requirement 
like that. Is that true?
    Ms. Stovall. I am not aware of any State that has that 
requirement. Again, States are trying to catch up with the 
Internet, so we would introduce it in our next legislative 
session. I think we will see lots of changes in laws because of 
the Internet.
    Mr. Whitfield. But it seems like this contract that the 
Internet service providers can require that all U.S. Laws must 
be met to distribute a particular product would be one pretty 
effective way to go after this, it would seem.
    Ms. Stovall. But assuming that company in Colombia signed 
that contract and then violated it by selling a product that is 
not lawful in Kansas, you still have the difficulty of going to 
get them.
    Mr. Whitfield. But in this case the FDA informed the 
service provider that it was violating the law by aiding the 
distribution of an unapproved drug and that they could be held 
liable.
    Ms. Stovall. Right. I understand where you are headed. We 
have had good success with Internet providers that have 
gambling web sites as well, that when we have contacted them 
and said this is illegal in Kansas, they stopped the service.
    Mr. Whitfield. Right. Well, it is quite an interesting 
dilemma, and a lot of public policy issues are there.
    I see my time has expired, Mr. Chairman.
    Mr. Upton. Thank you.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I apologize for being 
late, but I have a committee meeting upstairs. I would like to 
ask unanimous consent to place my statement into the record.
    Mr. Upton. Without objection.
    [The prepared statement of Hon. Gene Green follows:]
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    Mr. Chairman, I would like to start by thanking you for holding 
this important hearing.
    While the growth over the past several years in e-commerce has been 
a positive experience for both consumers and retailers alike, in the 
past, this Committee has tried to look at ways to balance the right of 
open access to the Internet with responsible safeguards to protect 
consumers from online predators.
    To ensure this continued growth and prosperity, we need to provide 
appropriate safeguards to protect consumers from online scams. An 
emerging area of concern is the growth of on-line pharmacies who 
operate without regard for standard practices of medicine.
    Recent reports of a Viagra prescription being filled for a cat and 
broader concerns that legitimate prescriptions are being filled 
inappropriately, underscore the fundamental need for action.
    At the same time that this Congress is attempting to reduce the 
cost of prescription drugs for seniors, we have a responsibility to 
ensure that the cheaper alternatives are safe and effective.
    In my home state of Texas, seniors frequently travel to Mexico to 
purchase prescription drugs at below-market prices. Unfortunately, the 
drugs they purchase in Mexico are unregulated and therefore, 
potentially harmful.
    On-line pharmacies present not only this problem, but the 
additional fact that it is nearly impossible to regulate the Internet.
    While I do not support regulation of e-commerce as a matter of 
practice, there are steps that can be taken to improve the system 
before the drugs are sent to the consumers.
    First, we should make sure pharmaceutical wholesalers are only 
selling their products to legitimate and credible pharmacies.
    This means you can't send thousands of pills to someone .just 
because they are willing to pay for them.
    Second, the FDA or FTC should help consumers navigate the maze of 
online pharmacies by highlighting both the good and bad players in the 
industry.
    While we can and should pass safeguards to guide online pharmacies, 
we have to recognize that enforcement of these guidelines will be 
nearly impossible.
    However, by educating the public and highlighting unethical 
behavior, we can hopefully reduce the number of individuals who are 
victims of online scams.

    Mr. Green. I think the first panel we have--and, one, I 
want to welcome you. My home is in Houston, and particularly in 
Texas what we see is my senior citizens drive from Houston to 
the border to buy their prescriptions. They will come back 
across, and they have a limit of the 30-day supply or something 
like that. I know from the testimony of Mr. Michael, for 
seniors, it is much cheaper on-line.
    The frustration we have as policymakers, whether it be in 
Austin or Kansas or Texas, in trying to regulate it yet still 
allow for the opportunities that economies of scale benefit. 
The frustration, I guess, we have because they are violating 
State law or maybe Federal law on postal regulations, to use 
the U.S. Mail.
    On Monday, we are going to debate a bill on alcohol sales. 
You know, people are buying wine over the Internet, and yet 
each State has different laws and--although we all have the 
same drinking age, I guess, now. But how do you check someone's 
drinking age over the Internet anymore than you can do--my 
first question, I guess, Ms. Stovall, do you know of any other 
States that are being as aggressive as Kansas is in dealing 
with this?
    Ms. Stovall. I would certainly like to say we are the lead, 
but that is from my own desire to brag. But my neighboring 
State of Missouri has filed suit against a company. Texas is 
doing a lot with their administrative agencies as well. There 
are other State AG offices very close to filing and many 
administrative agencies that already have pursued 
administrative actions.
    Mr. Green. Okay. Anybody on the panel, is there a way we 
can balance it? Because, again, people in the northern part of 
our country go to Canada to buy their prescriptions, and 
obviously in the western or southern part, you go to Mexico. Is 
there any way we can balance it and still have the savings 
sometimes that our seniors literally have to take advantage of 
to be able to benefit from their own prescriptions?
    Ms. Stovall. I think we just enforce the laws that are on 
the books. There are legitimate pharmacies now that prescribe 
over the Internet and do so within the full parameters of 
lawful activity, and we just need to be able to have the 
resources to enforce the law against those that don't. Then we 
do get the benefits of good service when it is a licensed 
pharmacy. Then you know it is a legitimate drug that has been 
approved by the FDA being dispensed, so the questions raised 
earlier would be resolved, and then that is how I think you get 
those benefits.
    Mr. Green. So you are not suggesting we need any new 
Federal laws to deal with this, just the resources to apply 
current law, both State and maybe Federal?
    Ms. Stovall. The only Federal help I think that would be of 
assistance is if there is the ability of a State AG to file in 
Federal court and get nationwide injunctive relief, like we 
have with telemarketing. That would be the only thing at this 
point I see that might be particularly helpful.
    Mr. Green. Any response from any other witnesses?
    Ms. Egan. I think one of the problems we saw was you order 
from one company, it seems to get shipped from another company, 
and then there is like another company. It is not one company. 
It comes from Germany, Japan, Hong Kong, you name it. So it is 
like a shell game.
    Mr. Green. And you are----
    Ms. Egan. It makes it hard to get a handle on who it is you 
are actually seeking.
    Mr. Green. Much less the location. Of course, if they are 
within the United States, you have that ability. It is tougher 
when you go to Colombia, Germany, Japan, wherever else.
    What responsibilities do you feel like the major 
manufacturers--because in the testimony in the news media, you 
know, again, a lot of our pharmaceuticals that are in the 
United States are the ones we are actually buying from 
overseas. Do you think there is a responsibility of the drug 
manufacturers with regard to the pharmaceuticals? Anyone?
    Ms. Stovall. I think from a practical standpoint those 
major manufacturers know it is in their own best interests to 
try to control the flow of their product. As Congressman Bryant 
indicated, Pfizer has stepped forward to our office and said we 
want to help and be involved in this process. I think from a 
liability standpoint that is what they need to do to protect 
themselves.
    Mr. Green. Thank you, Mr. Chairman. I thank this panel.
    Mr. Upton. Thank you.
    I would like to say a number of members have a couple of 
additional questions, so we will proceed along that line. And, 
hopefully, not all members will have questions; and those 
questions will, in fact, remain at just a couple.
    I have--I guess as I have listened to the testimony and to 
try to sum things up, this is a very perplexing problem. You 
have a drug manufacturer that might be headquartered in one 
State. Their actual manufacturing site may be in another State. 
You have got an individual in whatever State using the 
Internet, which is national. You have got a physician who may 
or may not be licensed in this country but perhaps from another 
State, and you are using an interstate carrier, whether it be 
the Postal Service or Federal Express or UPS.
    Whereas the system has worked for decades and decades under 
State regulation and authority, as physicians--and physicians 
are licensed differently in different States with different 
regulations and different information that is allowed to be 
dispensed to the patient, you have got a question of, which 
laws are you enforcing? Are you enforcing the State of Kansas 
laws or the State of Michigan laws or the State of Pennsylvania 
laws? And you have got a number of probably unscrupulous 
characters, as was illustrated in Mr. Stupak's exhibit, of some 
over 300 Internet providers that may not be licensed or 
regulated at all.
    So, Ms. Stovall, when you say you don't really want Federal 
legislation because the Kansas legislation--and all of a 
sudden, if you are from Kansas and they have now got that 
little disclaimer, if you are from Kansas, don't bother to 
register, reminds me of some of those sweepstakes winners. If 
you are from, I don't remember what State it was, but don't 
bother to apply. That doesn't always work.
    If you want to go to Federal Court, that is one of your 
comments here, you would like the access to Federal courts. 
Again, it is sort of difficult to go to Federal Court perhaps 
without a Federal law versus a State law that might be on the 
books. So it really is a very perplexing problem.
    You know, as we sort of struggle with clear abuses, you 
know, as we talk to the pharmaceutical manufacturers, they 
distribute to other wholesalers, and it is sort of a hands-off 
operation. That is how the system works. And, obviously, they 
are in the business of doing billions of tablets or whatever of 
a variety of different things, as Mr. Klink illustrated. You 
would have to have almost a pretty radical approach to the way 
they currently distribute their medication, which is, I think, 
most observers would say we have a better system in this 
country than just about anyplace else in the world.
    So the system, that system, isn't necessarily broken, but 
with the advent of the Internet, yes, we do have problems, 
whether it is Phred the dog or Tom the cat or someone who died 
20-some years ago, let alone any other wild-eyed example that I 
think we can come up with.
    So I would just appreciate maybe further input from you. I 
will be talking to my State Attorney General to see what her 
thoughts are as she interacts with her colleagues, including 
you, in terms of what we can do to particularly help the States 
enforce their laws in a more reasonable and careful manner.
    I yield to Mr. Klink.
    Mr. Klink. Thank you, Mr. Chairman.
    I just wanted to read into the record, this is the FDA Week 
from this week, July 23: An unapproved HIV test kit highlights 
problem with Internet promotion. Highlighting the recent 
difficulties FDA is having in regulating methodical products 
promotioned on the Internet, FDA recently issued a warning to 
consumers about unapproved HIV testing kits being sold on-line. 
This test was found to indicate false negative results, FDA 
said. In other words, blood samples from known HIV patients 
came back as negative. FDA sources say this is not an 
unprecedented case and may highlight the problems that FDA is 
facing with the new medium.
    It goes on to say, one of the ways that FDA gets involved 
in these cases, whether it is Internet sale of pharmaceuticals 
or these test kits, is you have to get a complaint from 
somebody that feels that they have been ripped off. It is like 
it is okay to sell heroin on the street corner or crack 
cocaine. We will only send out the drug officers after one of 
the customers complains.
    Think about it. That is literally what is happening. The 
FDA, the Federal Trade Commission, seem ill-equipped to deal 
with this. They are going to testify a little later on and tell 
us they have these task forces. My question is, what have these 
task forces accomplished?
    We want to work with the States. I am willing to bend over 
backwards to preserve States rights, but there has to be some 
universal method of dealing with this problem. We haven't 
gotten it.
    This is a great panel. You all have been great witnesses. 
We haven't gotten there yet. I am really thankful for this 
beginning hearing.
    The question that we have is, General Stovall, I will start 
with you, it appears that if we--at a very minimum, we had some 
regulations that said, all right, tell us where you are 
located, where your offices are, on the web site, they have to 
be there. Where is your web site located? Where you operate 
from? Where is your warehouse? Who are your doctors? Who are 
the principals? Who licenses you? By what authority are you 
selling these medications? And if you are not doing that, then 
there should be authority, either the States and the Federal 
Government working together, to shut those web sites down. That 
seems to me to be a start. I am asking your opinion.
    Ms. Stovall. Absolutely. That was in my testimony as well. 
I agree with you wholeheartedly, that either all the States or 
the Federal Government need to make those requirements for 
disclosure.
    Mr. Klink. Well, we began, as Chairman Upton said, 7 or 8 
months ago looking at this issue. For the last couple of 
months, we have been drafting a bill to do exactly that.
    We would like to work with you, General, and with other 
State officials; and we have sent staff, majority and minority 
staff, across the country. We have been stymied by the fact 
that it appears that the States are overwhelmed by this.
    One State official told us, and this is not negative toward 
the States, we don't have time to sit and play on the Internet 
all day. That is the way they viewed it. I understand that.
    But it is a serious problem, and that is what it would 
require. It would require somebody actually sitting there on 
the Internet. And we are finding, as I said in my opening 
statement, I think, 30, 40 different sites every week. So it is 
very difficult to do that.
    Does that begin to get us then--let me ask Ms. Egan and Ms. 
Behrens--get us where we need to be, if at least those sites 
are then held accountable for who operates them, who they are 
licensed by, where they are located? In other words, some 
disclosure of who is responsible, that we could begin to 
determine the chain of control of these controlled substances? 
We are then doing it by law.
    Ms. Egan. I think it certainly gives consumers a better 
idea of what they are dealing with, and they could call a board 
of pharmacy and run that by them if they had a license and 
number and name. Even if somebody put in a fake one, they could 
check it. If they wanted to be that diligent, a consumer could 
do that.
    Mr. Klink. You know, I am sure some of you have heard about 
this, there is the VIPPS program, which is voluntary. The Board 
of Pharmacy is not a law enforcement agency. The question I 
would have is, how often would they go out and inspect, and if 
they inspect and found out something was wrong, then what do 
you do?
    Somebody on the majority side mentioned the fact that you 
could counterfeit the VIPS' Good Housekeeping Seal of Approval. 
We all recognize that. So the question here is whether or not 
there is a role to be played between those of us in the Federal 
Government--and, again, somebody else mentioned a floor, not a 
ceiling. We can't have some States taking action and some not, 
a patchwork of one set of regulations in one State, one set in 
another, when these things are not only, as the Chairman said, 
sold across State linings but are international as well. How 
can we have the States--and I would ask General Stovall, how 
would you be prepared from the State of Kansas to send your 
people out to other nations and go to New Zealand, Singapore, 
China----
    Ms. Stovall. We have a lot of volunteers.
    Mr. Klink. When you get there, what authority do you have 
to take action?
    Ms. Stovall. We don't. That is the difficulty, and what I 
mentioned earlier. For companies doing business on foreign 
soil, it is very difficult for us. There isn't any question 
about that.
    Mr. Klink. Well, we are looking forward to drafting our 
bill, and we would like to work with you before we do to make 
sure that, again, we want State input, make sure that we are 
working together with the States on this issue, but we think 
that there is a role hand in hand for the State and Federal 
Governments to work together.
    Ms. Stovall. The National Association of Attorneys General 
would be delighted to work with the committee on that.
    Mr. Klink. Thank you, Mr. Chairman.
    Mr. Upton. Do other members have pressing questions that 
would otherwise prevent us--thank you very much, members and 
panel, appreciate your very good testimony. We look forward to 
working with all of you, and we may have additional questions 
that we may forward on, particularly for those members that are 
at other subcommittees, and if you would respond to that, that 
would be terrific.
    You are now formally excused. Thank you.
    Our second panel consists of Dr. Janet Woodcock, the 
Director for the Center for Drug Evaluation and Research at the 
Food and Drug Administration; Ms. Jodie Berstein, Director of 
the Bureau of Consumer Protection in the Federal Trade 
Commission; and Mr. Ivan Fong, Deputy Associate Attorney 
General, Department of Justice.
    If you could take seats at the table, and before you sit 
down, you might have heard me tell the first panel that we have 
a long tradition of taking testimony under oath. Do any of you 
have objection to that?
    Hearing none, under House rules, you are allowed to have 
counsel if you desire. If you would raise your right hand.
    [Witnesses sworn.]
    Mr. Upton. You are now under oath. Your testimony is made 
part of the record in its entirety, and we would like to ask 
you, if you can, to summarize your testimony in 5 minutes or 
less.
    Mr. Upton. Ms. Bernstein, we will start with you.

  TESTIMONY OF JODIE BERNSTEIN, DIRECTOR, BUREAU OF CONSUMER 
  PROTECTION, FEDERAL TRADE COMMISSION; IVAN K. FONG, DEPUTY 
 ASSOCIATE ATTORNEY GENERAL, DEPARTMENT OF JUSTICE; AND JANET 
 WOODCOCK, DIRECTOR, CENTER FOR DRUG EVALUATION AND RESEARCH, 
                  FOOD AND DRUG ADMINISTRATION

    Ms. Bernstein. Thank you, Mr. Chairman, members of the 
subcommittee. I am pleased to be here to present the testimony 
of the Federal Trade Commission and to work with the committee 
on these important issues. The Commission's been monitoring the 
marketing of health care products and services on the Internet 
and pursuing law enforcement in this area for some time. The 
agency's conducted enforcement and consumer education 
initiatives to combat----
    Mr. Upton. If you could put the mike just a little closer, 
there is a little noise coming from the hallway. That would be 
great.
    Ms. Bernstein. [continuing] to combat on-line health fraud 
and is leading the effort to protect consumer privacy on-line. 
We are monitoring on-line pharmacy Web sites as well, 
conducting investigations, and making referrals to other State 
and Federal authorities as appropriate.
    Prescription drugs available through on-line pharmacies 
offer consumers convenience and value. You have heard that a 
lot this morning, and we would reiterate that. Many on-line 
pharmacies appear to operate the same way as mail order 
pharmacies do; that is, in keeping with standards of State 
licensing authorities. Nevertheless, our review of the current 
practices of some on-line pharmacies and physicians that 
provide on-line prescription services indicate the potential 
for consumer injury is significant.
    For example, just imagine the possibilities, and you've 
heard some this morning, for harm when prescriptions are issued 
without an adequate review of a consumer's medical history or 
when unapproved drugs are sold to consumers over the Internet 
by overseas pharmacies.
    I know you have heard some of the anecdotes already, but we 
have one that I thought I would share with you as well. Our 
staff engaged in two mock on-line consultations in order to 
obtain the prescription drug Viagra. They were people, not dogs 
or cats, but nonetheless are illustrative. Although a number of 
factors were described in the medical history by our folks, and 
those medical histories should have raised serious concerns 
about the appropriateness of using a prescription for Viagra, 
such symptoms as bypass surgery, obesity, family history of 
heart disease and no information about other medications, a 
prescription was issued without question. Our staff were able 
to purchase Viagra on-line. Fortunately, through careful 
investigation we were able to identify both the doctor and the 
pharmacy involved in the sale and refer them to the relevant 
State and medical pharmacy boards.
    The rapid growth in on-line sales of prescription drugs and 
the increase in the practice of on-line prescribing occurring 
across State, even international, borders present significant 
technological logistical challenges to the traditional 
regulatory framework. State medical and pharmacy boards have 
expressed concerns that their existing enforcement tools are 
not adequate to police the on-line marketplace. In many cases 
it can be difficult without extensive investigations to 
identify the name, location, State of licensure or registration 
for the physicians, pharmacies and Web site operators involved 
in the practices.
    Our review of the 90 sites that Representative Dingell and 
Representative Klink sent us found--and we do have a visual--
that there are very few that are providing adequate identifying 
information, sometimes no more than a mail drop. As you can see 
from the Pill Box that we've put in our graphic, this is what 
our review of those sites found. We have tried to summarize it 
for you.
    Seventy percent of the sites were registered to a U.S. 
Address, although it was not easy to ascertain that. Forty 
percent provided a physical address on the site. Eighty percent 
offered an on-line consultation as a way to obtain a 
prescription, and most required a consultation. Twenty percent 
sold prescription drugs without a prescription, and only four 
sites appeared to require the patient to provide a prescription 
from the patient's own physician before they'd sell the drug.
    Although medical information is the most sensitive kind of 
personal information, and these are some findings we made on 
the issue of privacy, none of the sites posted an adequate 
privacy statement describing what information's collected, how 
it would be used and whether it'll be disclosed to third 
parties. Sixty percent of the sites simply said that the 
information would be treated confidentially without saying how 
it would be used, and 40 percent of the sites provided no 
notice, not a word, about how they would handle the information 
from the consumers.
    As to the identity of the prescribing physician or 
dispensing pharmacy, virtually none of the on-line pharmacy 
sites provided that information. Even when these parties can be 
located, it's difficult and expensive for any State medical or 
pharmacy board to pursue law enforcement against an out-of-
State physician or pharmacy, as you just heard from General 
Stovall, and we agree with that, with her analysis.
    The Commission can protect consumers that use on-line 
pharmacies by bringing cases against specific deceptive 
practices, and we can and we have assisted other Federal and 
State authorities in their investigatory work, but the FTC's 
authority is limited and may not fully address the important 
consumer protection issues relating to the appropriate 
standards for prescribing and dispensing drugs traditionally 
regulated by the States. Based on our experience, we have 
recommended, and we do recommend and you've already heard much 
about it, that help for the State authorities in their 
investigations is necessary.
    We would hope the subcommittee, and it already has stated 
that it probably will, consider legislative measures to mandate 
the posting of identifying information about physicians, 
pharmacies and Web site operators. Very specific information is 
required, and I won't go through that because I believe, 
Congressman Klink, you just identified the appropriate 
information.
    We also would like to recommend that the subcommittee 
consider whether other measures are necessary, and again, 
General Stovall mentioned the FTC's experience in the 
telemarketing area. When telemarketing proliferated without a 
Federal statute, the same kinds of interstate problems arose; 
that is, the States were able to enforce within their own 
borders, but found the difficulties of stopping at the border 
to be a severe impediment. The Congress adopted the 
Telemarketing Sales Act which set a Federal standard and for 
the first time authorized the States to pursue those claims in 
Federal court.
    We have worked very closely with the States, and in effect, 
we have 51 cops on the beat instead of one. It has been a very 
valuable experience from a federalism point of view, and we 
think the same kind of response could be helpful here. Thank 
you for giving us the opportunity to present our testimony this 
morning.
    [The prepared statement of Jodie Bernstein follows:]
  Prepared Statement of Jodie Bernstein, Director, Bureau of Consumer 
                              Protection,
    Mr. Chairman and members of the Subcommittee, I am Jodie Bernstein, 
Director of the Bureau of Consumer Protection of the Federal Trade 
Commission (``FTC'' or ``Commission''). I am pleased to have this 
opportunity to review with you the Commission's consumer protection 
activities relating to the practices of online pharmacies.1
---------------------------------------------------------------------------
    \1\ This written statement presents the views of the Federal Trade 
Commission. Responses to questions reflect my views and do not 
necessarily reflect the views of the Commission or any Commissioner.
---------------------------------------------------------------------------
                            i. introduction
    The Commission is well aware of the rapid growth of the marketing 
of health care products and services via the Internet and has been 
actively monitoring and pursuing law enforcement in this area for some 
time. The agency, for instance, has conducted enforcement and consumer 
education initiatives to combat health fraud on the Internet; has been 
a leader in protecting consumer privacy in the online medium; and is 
now monitoring online pharmacy websites, conducting investigations, and 
making referrals to other federal and state authorities as appropriate. 
This morning I will discuss our authority in this area, how the FTC's 
role relates to that of other federal and state authorities, and 
describe some of our enforcement efforts and other activities to 
protect the online consumer from the deceptive marketing of health care 
products generally, and prescription drugs specifically. I would also 
like to identify what the Commission believes are the most significant 
challenges facing federal and state authorities with enforcement 
authority over online pharmacies and suggest possible solutions.
    The Internet offers significant consumer benefits in the form of 
greater and easier access to detailed health information, as well as 
more convenient, and often cheaper, access to health care products and 
services. In 1998, 22.3 million adults in this country sought health 
and medical information online, nearly 70% before visiting a doctor's 
office.2 The number is predicted to increase to 30 million 
by the year 2001.3 More and more often, consumers are 
turning to the Internet not just for health information but to purchase 
health care products. Unfortunately, the online medium also provides an 
easy opportunity for irresponsible marketers to prey on sick or 
vulnerable consumers with potentially serious consequences to 
consumers' health and pocketbooks.
---------------------------------------------------------------------------
    \2\ Cyberdialogue, Inc. (June 1999).
    \3\ Id.
---------------------------------------------------------------------------
    Like other health care promotions on the Internet, the availability 
of prescription drugs via online pharmacies offers potential benefits 
to consumers, including convenience and value. Many online pharmacies 
appear to operate in essentially the same manner as mail order 
pharmacies and in keeping with standards of state licensing 
authorities. Nevertheless, our review of the current practices of some 
online pharmacies and of some physicians that provide online 
prescription services indicates the potential for serious consumer 
injury. Significant potential for injury exists when prescriptions are 
issued without adequate review of the consumer's medical history or 
when unapproved drugs are sold to consumers over the Internet by 
overseas pharmacies. The Commission has limited anecdotal evidence of 
specific occasions where consumers have, in fact, received a 
prescription drug via the Internet that would be clearly inappropriate 
or even dangerous because of the age, health, or other drug use of the 
consumer.4
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    \4\ We have received very few complaints about online pharmacies. 
In one complaint filed with the FTC, however, a parent reported that 
her minor son had obtained Viagra' over the Internet. Part 
of the parent's concern was the fact that her son had bipolar disorder, 
neurocardiac syncope, and was taking blood pressure medication at the 
time, clearly increasing the potential for injury from using this drug.
---------------------------------------------------------------------------
    As the Subcommittee is aware, the rapid growth in online sales of 
prescription drugs and the increase in the practice of online 
prescribing, both of which are occurring across state and even 
international borders, present significant technological and logistical 
challenges to the traditional regulatory framework. State medical 
boards and state pharmacy boards have both expressed concerns that 
their existing enforcement tools are not adequate to police the online 
medium.5 In many cases it can be difficult, without 
extensive investigation, to identify the name; location; and state of 
licensure or registration for the physicians, pharmacies, and website 
operators involved in these practices. Our review of almost 100 sites 
provided by Subcommittee staff found that very few provided adequate 
identifying information. Even when parties can be located, it can be 
difficult and costly for a state medical board or a state pharmacy 
board to pursue law enforcement against an out-of-state physician or 
pharmacy prescribing or dispensing prescription drugs inappropriately 
via the Internet.
---------------------------------------------------------------------------
    \5\ See, e.g., letters from the Connecticut Medical Examining 
Board, dated March 19, 1999 (``the difficulties of exercising 
jurisdiction over an out-of-state physician who does not have a 
Connecticut license in these circumstances are substantial''); 
Louisiana State Board of Medical Examiners, dated January 29, 1999 
(``Regrettably, our investigations have revealed that those individuals 
who have advertised and dispensed Viagra' without physical 
examination, have been physicians licensed in states other than 
Louisiana and located beyond our jurisdictional reach.''); Board of 
Medical Licensure & Supervision of the State of Oklahoma, dated 
February 19, 1999 (``Oklahoma law does require establishment of valid 
doctor/patient relationship and proof of medical necessity for any type 
of treatment but obviously this Board has no jurisdiction across state 
lines.''); Tennessee Board of Osteopathic Examination, dated March 10, 
1999 (``Having jurisdiction over the issue is one thing; practically 
enforcing the situation is quite another issue.''); and State of 
Wisconsin Department of Regulation & Licensing, dated February 12, 1999 
(``Wisconsin does not have the ability to police this kind of activity 
all around the country.'').
---------------------------------------------------------------------------
    The Commission can play a role in protecting consumers who use 
online pharmacies by bringing cases against specific deceptive 
practices. The agency can also assist other federal and state 
authorities in their investigatory work. The FTC's authority, however, 
is limited and may not fully address the important consumer protection 
issues raised here. To a large extent, the practices that present the 
greatest concerns involve issues relating to the appropriate standards 
for prescribing and dispensing drugs, both of which have been 
traditionally regulated by the states. The Commission suggests that the 
Subcommittee consider whether additional legislative measures are 
necessary to address the unique characteristics of this medium and 
ensure greater protections for consumers. Specifically, requirements 
for clear and prominent disclosure of identifying information for the 
online prescribing physician, the online pharmacy and the website 
owner, if different, as well as the states where prescriptions will be 
dispensed, would greatly assist state law enforcement efforts. We also 
recommend that additional consideration be given to assisting states 
with extraterritorial jurisdiction issues.
                   ii. scope of commission authority
    The Commission's authority derives from the agency's mandate to 
prevent deceptive or unfair acts or practices in commerce, pursuant to 
Section 5 of the Federal Trade Commission Act (``FTC 
Act'').6 The marketing of prescription drugs online would be 
deceptive in violation of FTC law if it involved a misrepresentation or 
omission likely to mislead consumers acting reasonably under the 
circumstances to their detriment. Thus, the Commission has authority to 
bring an enforcement action where an online pharmacy makes false or 
misleading claims about the products or services it 
provides.7 For example, the Commission would have authority 
to take action if an online pharmacy or website operator made false or 
misleading claims about the safety or efficacy of the drug it was 
offering.8 Another example of a deceptive practice within 
the Commission's jurisdiction would be the misrepresentation by an 
online pharmacy of its privacy practices, for instance, false 
statements about how the site collects and uses medical information 
about the consumer.9
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    \6\ 15 U.S.C. Sec. 45 (a). In addition, Section 12 of the FTC Act 
prohibits the false advertisement of ``food, drugs, devices, services, 
or cosmetics.'' 15 U.S.C. Sec. 52. Under Section 4 of the FTC Act the 
agency has jurisdiction over marketers based outside the U.S. border 
selling in the U.S. market that violate Sections 5 and 12. 15 U.S.C. 
Sec. 44.
    \7\ See Deception Policy Statement, appended to Cliffdale 
Associates, Inc., 103 F.T.C. 110, 174 (1984).
    \8\ In fact, the Commission has challenged such claims in both the 
online context and in other media. See, e.g., American College for 
Advancement in Medicine, Dkt. No. C-3882 (June 22, 1999) (settlement 
resolving allegations respondent made unsubstantiated claims for 
effectiveness of therapy using prescription drug for treating heart 
disease); FTC v. Pacific Medical Clinics, 1992-1 Trade Cas. (CCH) para. 
69,777 (S.D. Cal. April 8, 1992)(defendants misrepresented 
effectiveness of prescription drug for treating obesity).
    \9\ The Commission has been very active in the protection of 
consumer privacy particularly in the online context, as discussed 
below. The agency has also specifically challenged misrepresentations 
about the use of a consumer's medical information, although not in the 
online context. See, e.g., Equifax, Inc., 96 F.T.C. 844 (1980), rev'd 
on other grounds, 678 F.2d 1047 (11th Cir. 1982)(deceptive to 
represent, inaccurately, that medical information would be released 
only to specified insurance companies).
---------------------------------------------------------------------------
    The Commission also has authority under its unfairness jurisdiction 
to regulate marketing practices that cause or are likely to cause 
substantial consumer injury, which is not reasonably avoidable by 
consumers, and not outweighed by countervailing benefits to consumers 
or to competition.10 Although some parties have suggested 
that certain online prescribing practices by physicians may be so 
inadequate as to be unfair, these practices raise difficult issues 
involving physician practices that the Commission has traditionally 
refrained from regulating.
---------------------------------------------------------------------------
    \10\ See Unfairness Policy Statement, appended to International 
Harvester Co., 104 F.T.C 949, 1070 (1984); 15 U.S.C. Sec. 45 (n).
---------------------------------------------------------------------------
     iii. interaction with federal and state regulatory authorities
    As we have noted, many aspects of the online prescribing and 
dispensing of prescription drugs do not fall clearly within the 
agency's traditional scope of authority or expertise and have been the 
primary responsibility of other federal and state agencies.
    The other principal federal agency with authority in this area is 
the Food and Drug Administration (``FDA''). The FDA has primary 
jurisdiction to regulate labeling and advertising claims made by the 
manufacturer, distributor or packer of prescription drugs.11 
In addition, the FDA has the authority to take action against the 
dispensing of a prescription drug without a valid 
prescription.12 Because the FTC and the FDA have such 
closely related and overlapping authority over a number of products, 
including prescription drugs, the two agencies coordinate closely 
pursuant to a longstanding liaison agreement.13 In fact, the 
Commission recently referred to the FDA's Office of Criminal 
Investigation two matters involving U.S. websites that were offering 
prescription drugs without requiring prescriptions.
---------------------------------------------------------------------------
    \11\ See 21 U.S.C. Sec. Sec. 351 et seq.
    \12\ See 21 U.S.C. Sec. Sec. 353(b)(1); 331(a), and 333.
    \13\ Working Agreement Between FTC and FDA, 3 Trade Reg. Rep. (CCH) 
para. 9,859.01 (1971). Under this longstanding formal liaison agreement 
the FDA has primary responsibility to regulate claims made in labeling 
and advertising of prescription drugs if those claims are made by a 
manufacturer, packer, or distributor. See Working Agreement Between FTC 
and Food and Drug Administration, 3 Trade Reg. Rep. (CCH) para. 
9,859.01 (1971). The agreement establishes the basic division of 
responsibilities of the two agencies with respect to the regulation of 
foods, drugs (both over-the-counter and prescription), cosmetics and 
devices. With the exception of prescription drugs, the FTC regulates 
advertising of these products, while the FDA regulates labeling.
---------------------------------------------------------------------------
    Many of the concerns expressed about online pharmacies relate to 
the practice of physicians engaging in online medical consultations 
with consumers and issuing prescriptions without any pre-existing 
doctor-patient relationship. The question of when and under what 
circumstances, if at all, it is safe and appropriate to prescribe 
medications without actually seeing a patient is difficult and raises 
issues that fall beyond this agency's traditional expertise.
    The Commission has long refrained from challenging practices that 
fall within the doctor-patient relationship, including communications 
between doctors and patients about course of treatment 
decisions.14 The FTC does not have the authority to revoke 
an individual physician's license or to enforce state licensing 
requirements. The agency believes that judgments about the practice of 
medicine are better left to the individual state medical boards, which 
establish standards of practice and oversee the licensing of individual 
physicians. It is our understanding that many states currently prohibit 
the issuing of prescriptions based solely on a consumer's answers to an 
online questionnaire.15
---------------------------------------------------------------------------
    \14\ In contrast, the Commission does address situations where 
medical professionals have made false or misleading claims in 
advertising or other promotional literature distributed to potential 
consumers about the efficacy, safety, cost or other benefits of the 
services or products they provide. Dr. Scott M. Ross, 115 F.T.C. 54 
(1992) (consent agreement resolving misrepresentations of safety, 
recovery period, discomfort of liposuction).
    \15\ See, e.g., attached letters from Alabama State Board of 
Medical Examiners, dated March 11, 1999; State of Colorado, Department 
of Regulatory Agencies, dated March 23, 1999; State of Connecticut, 
Department of Consumer Protection, dated December 17, 1998; Government 
of the District of Columbia, Department of Health, Office of 
Professional Licensing, dated March 5, 1999; Kansas Board of Healing 
Arts, dated January 5, 1999; Louisiana State Board of Medical 
Examiners, dated January 29, 1999; State of Nevada, Office of the 
Attorney General, dated March 25, 1999; New Mexico Board of Pharmacy, 
dated January 19, 1999; State of Oklahoma, Board of Licensure & 
Supervision, dated February 19, 1999; State of Tennessee, Department of 
Health, Health Related Boards, dated March 10, 1999; State of 
Wisconsin, Department of Registration & Licensing, dated February 12, 
1999.
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    Similarly, the licensing and regulation of pharmacies, like the 
licensing of physicians, has traditionally taken place at the state 
level by state pharmacy boards. The Commission does not have authority 
to revoke a pharmacy's license or to enforce regulations relating to 
licensing of pharmacies. Again, issues about what constitute 
appropriate practices by an online pharmacy are better left to the 
state authorities with the relevant expertise.
    While the Commission believes that state authorities should 
continue to have responsibility for enforcement of licensing 
requirements for physicians and pharmacies, the FTC has and will 
continue to provide assistance to those authorities in individual 
investigations.
    iv. specific commission activities relating to online pharmacies
    The Commission believes its role with regard to online pharmacies 
is limited under the current legal framework and that the primary 
responsibility should remain with the states and FDA. Within the scope 
of our authority, we have taken a number of actions in this area: 
monitoring websites; conducting investigations; and making referrals to 
other federal and state authorities. In addition, we coordinate many of 
our activities through an interagency working group.
    Because there are many federal and state authorities with specific 
roles in the regulation of physicians and pharmacies, it is critical 
that the various agencies coordinate closely. On April 26, 1999, an 
interagency working group, comprised of the FTC, FDA, the Department of 
Justice (DOJ), the Drug Enforcement Agency (DEA), and other federal and 
state agencies, met to consider the regulation of online pharmacies and 
other issues relating to the sale of drugs over the Internet. One of 
the group's tasks is to explore enforcement issues and potential 
jurisdictional gaps. One follow-up meeting has been held and an 
additional meeting is scheduled for September 1999. The FTC will 
continue to participate in the meetings of this group and to consult 
informally with appropriate authorities as specific issues arise.
    Another important function of the Commission is that of monitoring 
the practices of online pharmacy sites and using our Internet expertise 
to assist other state and federal authorities in their enforcement 
efforts. The FTC has the technical capacity to monitor and investigate 
Internet marketing and is continuing to upgrade our current technology. 
For example, our computer equipment permits staff to locate and 
preserve websites for evidentiary purposes.
    The Commission's monitoring activities have led to a few 
preliminary investigations. In one situation, staff completed two mock 
online consultations in order to obtain the prescription drug 
Viagra'. For one of these consultations, staff described a 
number of factors in the ``patient's'' medical history that should have 
raised serious concerns about the appropriateness of issuing a 
prescription for Viagra', such as bypass surgery, obesity, 
family history of heart disease and the absence of any information 
about other medications. In both cases, staff was issued a prescription 
without question and was able to purchase the Viagra' 
online. This investigation led to referrals to the relevant state 
medical and pharmacy boards. To the extent possible, Commission staff 
have also assisted state authorities in identifying and locating 
specific online pharmacies and physicians.
    The Commission has also played a role in other closely related 
areas involving the marketing of health care products on the Internet 
and the protection of consumer privacy online. For example, the 
Commission recently announced ``Operation Cure.All,'' a comprehensive 
consumer education and enforcement initiative to combat health fraud on 
the Internet. The project was the outcome of two ``surf days'' 
16 in which the FTC and other government and private partner 
organizations identified nearly 800 websites making questionable claims 
that a product or treatment could cure or treat diseases like cancer, 
arthritis, AIDS, multiple sclerosis, diabetes and heart disease. As 
part of this project, the Commission announced four cases against 
companies marketing non-prescription health products on the Internet 
and is currently pursuing additional cases.17 The Commission 
has also filed other cases against Internet marketers of health care 
products in recent years, including a dietary supplement program 
purported to cure Attention Deficit Disorder and another dietary 
supplement referred to as ``Vitamin O'' for the treatment of several 
diseases including cancer and pulmonary disease.18
---------------------------------------------------------------------------
    \16\ The FTC has developed a unique concept known as a ``surf 
day.'' Together with other law enforcement partners, FTC staff use 
common search engines to surf the Internet for a specified period of 
time and send business education messages via e-mail to websites making 
potentially deceptive claims.
    \17\ See Arthritis Pain Care Center (APCC) et al., File No. 982 
3182 (June 24, 1999)(consent subject to final approval challenging 
arthritis claims for CMO dietary supplement); Body Systems Technology, 
Inc., File No. 982 3177 (June 24, 1999)(consent subject to final 
approval challenging claims for treatment/cure of several diseases 
including cancer and AIDS for shark cartilage capsules and Cat's Claw 
herbal supplement); Pain Stops Here! Inc., et al., File No. 982 3175 
(June 24, 1999) (consent subject to final approval challenging claims 
for magnetic therapy to treat cancer, liver disease, arthritis and 
other conditions); and Magnetic Therapeutic Technologies, Inc. et al., 
File No. 982 3150 (June 24, 1999)(consent subject to final approval 
challenging claims for magnetic therapy devices to treat various 
diseases and conditions including cancer and high blood pressure). 
Operation Cure.All also included a consumer education campaign that 
provided links on our website, www.ftc.gov, to sources of reliable 
health information, gave tips to consumers on how to avoid ``virtual 
health fraud'' and set up ``teaser'' sites to alert Inter
    \18\ New Vision International, FTC Dkt. No. C-3856 (March 3, 1999); 
FTC v. Rose Creek Health Products, Inc., CS-99-0063-EFS (E.D. Wash.) 
(case pending).
---------------------------------------------------------------------------
    Finally, the Commission has been active in the protection of 
consumer privacy online, an area that has great relevance to the 
subject of online pharmacies given that highly sensitive medical 
information is often collected as part of the online consultation. The 
Commission, for instance, has engaged in extensive monitoring of the 
privacy practices of websites, has conducted workshops on the issue, 
prepared reports to Congress on the self-regulatory efforts of industry 
on this topic, assisted in the development of legislation to protect 
children's online privacy, and issued proposed rules to implement that 
legislation.19 The Commission has also brought enforcement 
actions against websites engaged in deceptive practices relating to the 
collection and use of personal consumer information.20 
Online pharmacies that make false or misleading representations about 
how they collect and use personal information would be subject to 
similar FTC challenge.
---------------------------------------------------------------------------
    \19\ See, e.g., ``Self-Regulation and Privacy Online,'' Prepared 
Statement of the Federal Trade Commission before the Subcommittee on 
Telecommunications, Trade, and Consumer Protection of the U.S. House 
Committee on Commerce (July 13, 1999); Federal Trade Commission, Self-
Regulation and Privacy Online: A Report to Congress (July 1999).
    \20\ See, e.g., GeoCities, C-3849 (Feb. 12, 1999)(consent order 
challenging misrepresentations about the website's use of personal 
information collected from children and adults).
---------------------------------------------------------------------------
                             v. conclusion
    The Federal Trade Commission will continue to do its part to combat 
deceptive practices by online pharmacies and to assist other 
authorities in their investigative work. For the most part, however, 
the practices that present the greatest concern and risk of consumer 
injury are those involving the professional conduct of individual 
physicians or issues relating to the licensing of pharmacies and 
safeguards on the dispensing of prescription drugs that have 
traditionally been regulated by state authorities. Those state 
authorities appear to have laws that are substantively adequate to stop 
irresponsible prescribing and dispensing of drugs via the Internet. The 
real challenge lies in dealing with the logistical difficulties of 
identifying responsible parties and enforcing laws across state 
boundaries. State authorities and other groups are attempting to 
address the most troubling practices through issuance of guidelines, 
certification programs and other non-legislative 
approaches,21 but those efforts, while valuable, still do 
not provide the tools necessary for effective and meaningful 
enforcement.
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    \21\ Specifically, it is our understanding that the National 
Association of Boards of Pharmacy is currently developing a 
certification program for online pharmacies, the ``Verification of 
Internet Pharmacy Practice Sites (VIPPS).'' In addition, the Federation 
of State Medical Boards is currently addressing the issue of online 
prescribing by physicians and considering a recommendation that 
prescribing, electronically or otherwise, without an adequate patient 
evaluation be considered unprofessional conduct under state medical 
practice. Finally, we understand that the AMA has adopted a resolution 
on this issue and is developing principles regarding online prescribing 
services.
---------------------------------------------------------------------------
    Based on the Commission's experience in this area, we recommend 
that the Subcommittee consider legislative measures that would assist 
state authorities in their investigations by mandating that certain 
identifying information about physicians, pharmacies and website 
operators be posted. Specifically, we suggest that each website 
offering prescription drugs for sale be required to disclose the 
following information clearly and prominently:

1) the name, business address, and phone number of the pharmacy that 
        will dispense the prescription and the state or states where 
        such pharmacy is licensed or registered to do business;
2) the name, address, and phone number of each physician providing the 
        online prescribing services and the state or states where such 
        physician is licensed or authorized to practice medicine, if 
        such service is offered;
3) the name, business address, phone number, and principal officers or 
        owners of the online business offering prescription drugs, if 
        different from the pharmacy or physician; and
4) the state or states from which the website will accept orders for 
        prescription drugs.
    Finally, the Commission recommends that consideration should be 
given to determining what other measures are necessary to assist state 
pharmacy and medical boards with enforcement of state laws against 
extraterritorial prescribing practices, including possibly granting 
states the authority to bring actions in federal district court.
    Thank you for this opportunity to present the Commission's views. I 
will be happy to respond to your questions.
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    Mr. Upton. Thank you.
    Mr. Fong.

                    TESTIMONY OF IVAN K. FONG

    Mr. Fong. Good morning, Mr. Chairman, members of the 
subcommittee. Thank you for inviting the Department of Justice 
to testify today on this important topic. I will summarize the 
written testimony that you have received.
    We are not at this time advocating any particular 
legislative action, but would hope to inform you about our 
efforts to respond to the many complex legal and policy issues 
raised by this new development.
    The growth in Internet prescription drug sales undoubtedly 
has the potential, as you've heard this morning, to provide 
significant societal benefits. Individuals who might otherwise 
have difficulty going to a pharmacy to obtain needed 
medications--shut-ins, the elderly, those in rural communities, 
for example--will surely benefit from the convenience of being 
able to order and obtain their prescription drugs on-line. On-
line sales are also likely to foster price competition for 
prescription drugs among licensed sellers.
    Recognizing these benefits is consistent with the 
administration's general policy concerning the Internet and 
electronic commerce. That policy includes support for industry 
self-regulation where possible, technology-neutral laws and 
regulations, and an appreciation of the Internet as an 
important medium, both domestically and internationally, for 
commerce and free speech.
    In the area of on-line sale of prescription drugs, this 
means that any enforcement initiatives that we undertake should 
be carefully designed to deter unlawful pharmacy practices to 
accomplish important public health goals without stifling the 
growth of the Internet generally or chilling its use as a 
communication medium, including its use for lawful commercial 
purposes.
    In the context of law enforcement, we believe this means 
that the government should treat physical activity and 
cyberactivity in the same way; that is, if an activity is 
prohibited in the physical world but not on the Internet, then 
the Internet becomes a safe haven for that criminal activity. 
Similarly, conduct that is not a Federal crime in the physical 
world should not be subjected to Federal criminal sanction 
simply because it is committed in cyberspace.
    In short, as a matter of policy, the same laws and 
regulations that currently apply to the corner pharmacy ought 
to apply to on-line pharmacies. The Internet, of course, has 
the strong potential to magnify the problem of unscrupulous 
activity or unlawful conduct in an unprecedented way. From a 
strictly legal standpoint, however, we believe that sales over 
the Internet ought not be treated any differently from, for 
instance, sales from your neighborhood pharmacy or sales that 
involve the use of the telephone.
    The Department of Justice is affirmatively responding in 
several ways to the recent growth of on-line pharmacies. We 
have begun to analyze the legal bases for possible enforcement 
actions. We're continuing to investigate and prosecute conduct 
that has long been illegal, but is only recently reappearing on 
the Internet, and we are working with other Federal agencies, 
States and relevant professional associations to develop 
coordinated public education as well as civil and criminal 
enforcement efforts.
    As you have heard this morning, there are a number of 
different kinds of on-line pharmacies. Some of them require a 
prescription from a licensed physician. Others offer an on-line 
diagnosis and will use the medical questionnaire that we have 
seen, and a third category allows consumers to purchase 
prescription drugs without a prescription at all.
    These kinds of pharmacies raise different questions, and 
they are different in the following respects. Some consumers 
are able to purchase drugs from physicians without the 
traditional protections afforded by the doctor-patient 
relationship, such as an office visit that allows for a 
physical examination or critical interactive questions or 
follow-ups. A second area of concern are situations in which 
consumers purchase drugs that are mislabeled or counterfeit. 
Finally, there are concerns that certain Web sites are nothing 
more than scams, collecting credit cards and cash, but 
providing no product.
    In our legal analysis, I want to highlight something that 
was mentioned this morning, which is that to the extent there 
is any question about the illegal nature of the obtaining of a 
prescription drug without a prescription, it's useful for me to 
quote directly from existing law. This is part of the FDA 
statute: ``The act of dispensing a drug contrary to the 
provisions of this paragraph,'' which requires a written 
prescription from a practitioner licensed by law to administer 
such drug, ``shall be deemed to be an act which results in the 
drug being mislabeled while held for sale.'' And as you know, 
introduction or distribution of misbranded drugs into 
interstate commerce is a Federal offense.
    We believe that the Department of Justice is and stands 
ready to prosecute these cases. We work very closely with our 
investigative agencies, and we look forward to answering your 
questions, and thank you for this opportunity to testify on 
this topic.
    [The prepared statement of Ivan K. Fong follows:]
  Prepared Statement of Ivan Fong, Deputy Associate Attorney General, 
                         Department of Justice.
    Mr. Chairman and Members of the Subcommittee: Good morning. My name 
is Ivan Fong. I am a Deputy Associate Attorney General at the 
Department of Justice. The Office of the Associate Attorney General is 
responsible for the management and oversight of, among other areas, the 
Department's civil litigating components, which include the Antitrust, 
Civil, Civil Rights, Environment and Natural Resources, and Tax 
Divisions. My particular responsibilities include civil litigation and 
technology policy issues, which include Internet and electronic 
commerce issues, as well as the enforcement of certain consumer 
statutes. This morning, at your invitation, I will address the 
Department's views regarding the sale of prescription drugs over the 
Internet. We are not at this time advocating any particular legislative 
action with respect to the sale of these drugs over the Internet. 
Rather, we hope to inform you about our efforts to respond to the many 
complex legal and policy issues raised by this new development.
  a. addressing unlawful conduct that involves the use of the internet
    Before I outline what the Department is doing in the area of 
Internet prescription drug sales, it is important to underscore, by way 
of background, a simple, and by now almost trite, point: The Internet 
has revolutionized and will continue to revolutionize the way in which 
we communicate, transact business, and indeed interact with one 
another.
    The growth in Internet prescription drug sales, for example, 
undoubtedly has the potential to provide significant societal benefits. 
Individuals who might otherwise have difficulty going to a pharmacy to 
obtain needed medications--such as shut-ins, the elderly, and those in 
rural communities--will surely benefit from the convenience of being 
able to order and obtain their prescription drugs online. Online sales 
are also likely to foster price competition for prescription drugs 
among licensed sellers.
    Recognizing these benefits is consistent with the Administration's 
general policy concerning the Internet and electronic commerce. That 
policy includes support for industry self-regulation where possible, 
technology-neutral laws and regulations, and an appreciation of the 
Internet as an important medium both domestically and internationally 
for commerce. In the area of online sale of prescription drugs, this 
means that any enforcement initiatives that we undertake should be 
carefully designed to deter criminal and illegal pharmacy practices on 
the Internet to accomplish important public health goals without 
stifling the growth of the Internet generally or chilling its use as a 
communication medium, including its use for lawful commercial purposes.
    In the context of law enforcement, we think the Administration's 
overall policy can be translated into the following general principles.

 First, the government should treat physical activity and 
        cyberactivity in the same way. If an activity is prohibited in 
        the physical world, but not on the Internet, then the Internet 
        becomes a safe haven for that criminal activity. Similarly, 
        conduct that is not a federal crime in the physical world 
        should not be subject to federal criminal sanction simply 
        because it is committed in cyberspace.
 Second, laws and policies relating to enforcement must account 
        for technological change, but should endeavor to be technology-
        neutral. Laws and policies tied to particular technologies may 
        quickly become obsolete and require further change or may 
        unintentionally provide an advantage to one type of technology 
        over another.
 Third, the Internet is different from prior modes of 
        communication in that it is a multi-faceted communications 
        medium that allows not only point-to-point transmission between 
        two parties (like the telephone), but also the widespread 
        dissemination of information to a vast audience (like a 
        newspaper).
    These general principles form the starting point for our analysis 
of the legal and policy issues relating to the sale of prescription 
drugs over the Internet. They suggest that, as a matter of policy, the 
same laws and regulations that currently apply to the corner pharmacy 
ought to apply to online pharmacies. The Internet, of course, magnifies 
the problem of unscrupulous activity or unlawful conduct in an 
unprecedented way. For example, searching Internet sites for the 
prescription drug ``Viagra'' and the word ``buy'' results in an 
overwhelming number of sites where Viagra can be purchased on line. 
Nevertheless, from a legal standpoint, we believe that sales over the 
Internet ought not be treated differently from, for instance, sales 
from your local pharmacy or sales that involve the use of the 
telephone.
b. the role of the department of justice in internet prescription drug 
                                 sales
    The Department of Justice is affirmatively responding in several 
ways to the recent growth in online pharmacies and prescription medical 
device distributors. We have begun to analyze the legal bases for 
possible enforcement against illegal practices of online pharmacies. We 
are continuing to investigate and prosecute conduct that has long been 
illegal, but that is only recently reappearing on the Internet. And we 
are working with other federal agencies, states, and relevant 
professional associations to develop coordinated public education as 
well as civil and criminal enforcement efforts.
    At the outset, it is important to note that we are only beginning 
to appreciate the complex and highly diverse operations involved in 
sales and distribution of pharmaceutical products over the Internet. We 
have learned, for example, that online pharmacies can generally be 
classified into three basic categories:

 The more traditional online pharmacies require consumers to 
        obtain a prescription from a licensed physician before ordering 
        the drug. A valid prescription is then submitted to the 
        pharmacy before the drug is dispensed.
 A second category of online pharmacies offers services to 
        ``diagnose'' a patient online, ``prescribe'' the medication, 
        and distribute it without a physician ever physically seeing 
        the patient. These pharmacies typically use an online medical 
        questionnaire, which asks for the patient's health profile, 
        current medication, and medical history. Based on this 
        questionnaire, a doctor who may be affiliated with the website 
        ``diagnoses'' the patient's ills and prescribes medication, 
        which the website's pharmacy then distributes.
 A third category of online pharmacies allows consumers to 
        purchase prescription drugs without any pretense of a 
        prescription.
    Cutting across these categories are different concerns that may be 
raised by online pharmacies. One area of concern arises from situations 
in which consumers are able to purchase drugs from physicians without 
the traditional protections built into the doctor-patient relationship, 
such as an office visit that allows for a physical examination and for 
the doctor to ask the patient critical questions designed to limit the 
harm caused by drug allergies and interactions. A second area of 
concern are situations in which consumers purchase drugs that are 
mislabeled or counterfeit. Finally, there are concerns that certain 
websites are nothing more than scams, collecting credit cards and cash, 
but providing no products. Each of these situations raises different 
legal issues and policy concerns and implicates the jurisdiction of 
different governments and agencies.
1. Overview of Legal Issues
    The Department of Justice--through its Civil and Criminal 
Divisions, local United States Attorney's Offices, the Federal Bureau 
of Investigation, and other components--enforces numerous consumer 
protection statutes for which the primary regulatory authorities are 
administrative agencies such as the Food and Drug Administration (FDA), 
the Drug Enforcement Administration (DEA), and the Federal Trade 
Commission (FTC).
    (a) Enforcement under the Food, Drug and Cosmetic Act--The federal 
Food, Drug and Cosmetic Act (FDCA) generally prohibits the manufacture 
and distribution of misbranded and adulterated drugs, thus requiring 
drugs to be labeled accurately and handled in ways that prevent them 
from becom ing contaminated or misused. In 1951, to protect the public 
from abuses arising from the sale of potent prescription drugs, and to 
relieve retail pharmacists from burdensome and unnecessary restrictions 
on the dispensing of over-the-counter drugs, Congress established the 
system that currently governs the sale of prescription drugs. See, 21 
U.S.C. Sec. 353(b)(1). Under that system, Congress relied on two health 
professionals--the patient's physician and a pharmacist--to protect 
patients from the knowing or accidental misuse of medicines that are 
toxic or that have the potential for causing harm.
    Accordingly, drugs that are considered prescription drugs under the 
FDCA may be distributed only with a valid prescription under the 
professional supervision of a physician. See, 21 U.S.C. Sec. 353. A 
prescription drug is considered ``misbranded'' if it is not dispensed 
pursuant to a valid prescription in accordance with 21 U.S.C. 
Sec. 353(b). Introduction or distribution of misbranded drugs into 
interstate commerce violates the FDCA. See, 21 U.S.C. Sec. 331(a). An 
online pharmacy that provides prescription drugs without a 
prescription--the third category of online pharmacies noted above--
would therefore be in violation of this requirement.
    Legal action to curtail such conduct--including the drugs 
distributed without a valid prescription--may be brought criminally or 
civilly. For a felony conviction, the government must establish that 
the defendant acted with an intent to defraud or mislead either the 
consumer or the government, or that the defendant is a repeat offender. 
Civil cases and misdemeanor prosecutions do not require proof of an 
intent to defraud or mislead.
    For online pharmacies that offer online diagnosis, prescription, 
and distribution of medication--the second category of online 
pharmacies noted above--the issue is whether the online interaction 
results in a valid ``prescription'' under 21 U.S.C. Sec. 353(b). If 
not, then the online pharmacy may be found to be distributing 
``misbranded'' medication in violation of the FDCA.
    In analogous situations, the Department has successfully prosecuted 
doctors and veterinarians for dispensing drugs without a valid 
prescription. For example, in several recent cases, we found that 
certain doctors were prescribing and distributing anabolic steroids to 
athletes and entertainers. The evidence showed that they distributed 
steroids not to treat medical conditions, but for purely cosmetic 
purposes, and that they did not examine the patients before dispensing 
the steroids. In those cases, we successfully argued that under section 
353(b), one may distribute prescription drugs only if (1) there is a 
bona fide doctor-patient relationship, and (2) the distribution is 
pursuant to a course of individualized treatment for a legitimate 
medical purpose.
    Whether a particular online pharmacy, such as one that provides an 
online questionnaire for the consumer to complete before the drug is 
dispensed, can satisfy these standards will depend on the specific 
facts involved and evidence presented. It may also depend on whether 
the resulting ``prescription'' is a valid prescription under relevant 
state law. The states of Kansas, Maryland, and Washington, for example, 
have taken legal action against doctors, websites, and pharamacies that 
dispense prescription drugs over the Internet in violation of state 
law.
    (b) Other Enforcement Theories--Apart from enforcement under the 
FDCA, the Department can also rely on other legal authorities. For 
instance, the Controlled Substances Act prohibits the dispensing of a 
controlled substance without a valid prescription. See, 21 U.S.C. 
Sec. Sec. 822, 829, and 841. A regulation issued by DEA defines 
``prescription'' in a way that may exclude ``prescriptions'' for 
controlled substances that are obtained through an online 
questionnaire. As an example of a prosecution in this area under the 
Controlled Substances Act, a grand jury in Maryland recently returned a 
34-count indictment against a physician for dispensing several 
controlled substances, including phentermine and fenfluramine, without 
a legitimate medical purpose.
    Another potential avenue for enforcement involves the Federal Trade 
Commission Act (FTC Act), 15 U.S.C. Sec. 45 et seq., under which we 
could proceed with a civil enforcement action in conjunction with the 
FTC. The FTC Act protects consumers from unfair or deceptive acts or 
practices. Many online pharmacies operate by making important 
representations to consumers. For example, the FTC has found websites 
that advertise that a physician reviews each application to purchase 
prescription medications. To the extent these representations are false 
or deceptive, or if a website operator sells prescription drugs and 
represents that the drugs are safe and effective without disclosing 
their possible adverse effects, then such operators may be engaging in 
unfair or deceptive trade practices.
    Indeed, some online pharmacies may suggest that completion and 
analysis of an online medical questionnaire is the equivalent of a 
visit to a doctor's office. Yet it seems clear that in almost all 
circumstances, filling out an online questionnaire is not the same as 
seeing a doctor. In fact, some prescription drugs, such as Viagra, have 
package insert labeling that specifies that a physical examination is 
required for proper prescribing of a product and physician follow-up. 
Because some of these websites appear to provide deceptive information, 
these sites may violate the FTC Act, and thereby subject the website 
operator to a civil enforcement action.
    The Department could also pursue similar theories under the federal 
mail and wire fraud statutes whenever an online or other pharmacy 
defrauds consumers in any way. Whether such a suit would be criminal or 
civil, under 18 U.S.C. Sec. 1345 or 21 U.S.C. Sec. 332, would depend on 
the precise facts of the case and the evidence of fraudulent intent. 
Schemes involving the sale of drugs or health products over the 
Internet may violate other related federal criminal laws. Some websites 
offer to bill private or public health care programs or insurers for a 
``doctor's'' advice or for the price of the drug or product itself. If 
any false representations are made to the insurer to obtain payment, 
violations of a number of federal criminal laws may occur, and the 
civil fraud laws may also be implicated.
    (c) Prescription Drugs Sales from Foreign Sources--The FDA has 
found that a fair percentage of online drug distribution is conducted 
by firms operating outside of the United States. These firms may be in 
countries where quality standards or manufacturing practices do not 
approach what the FDA requires for the approval of prescription drugs 
in the United States. Any effort to prohibit these firms from selling 
prescription drugs in the United States would be complicated, 
especially if the activity in question is legal in the country where it 
is originating.
    In addressing the online sale of prescription drugs, the United 
States must continue to enlist the cooperation of foreign governments 
in enforcing the laws of the United States relating to such sales. 
Although international awareness and cooperation on fighting crime has 
grown, we must continue to resolve philosophical differences between 
countries on combating the sale of illegal goods online and also to 
develop practical ways to enforce our laws. For example, our concern 
with prescription drugs from foreign countries is not necessarily with 
the Internet aspect of the sale, but with the illegal introduction of 
those drugs into the United States. Law enforcement agencies in the 
United States will have to obtain the cooperation of their counterparts 
in foreign countries with online prescription firms to prevent the 
shipping of such drugs into the United States. Such cooperation is 
particularly important because interdiction of relatively small 
quantities of prescription drugs sent through traditional mailing 
channels is not feasible. Overall, the Department supports the efforts 
being made to develop a comprehensive and global response to crimes 
facilitated by the Internet.
2. The Department's Experience in Related Areas
    The Department has successfully prosecuted doctors and pharmacists 
for prescribing drugs without a valid prescription. In the 1950's, for 
example, the Department prosecuted doctors and pharmacists who sold 
amphetamine and Benzedrine to undercover agents without any prior 
examination or diagnosis. In the 1980's and early 1990's, before 
steroids became a controlled substance, several doctors received 
significant sentences for supplying high-profile athletes and 
entertainers with prescription steroids for illegitimate cosmetic 
reasons. The DEA has investigated and we have prosecuted many 
physicians for dispensing controlled substances without a legitimate 
medical purpose.
    As I mentioned, online prescribing of approved drugs can present 
difficult legal issues. Nevertheless, we believe that the recent surge 
in online prescribing is ultimately a new version of an old problem. In 
the 1950's, individuals purchased drugs without valid prescriptions 
from doctors working out of truck stops. In the 1980's, doctors sold 
steroids out the back door of their offices. Today, it is the Internet, 
and not a truck stop or the back door, that can serve as an 
unscrupulous doctor's means to peddle drugs without prescriptions. When 
investigators bring those cases to our attention, we stand ready and 
able to prosecute them.
    The Department has already begun to investigate doctors and 
websites that dispense drugs based exclusively upon an online 
diagnosis, which usually consists of a medical questionnaire that the 
patient either fills out online or prints off her computer and mails or 
faxes to the website. For example, as I mentioned above, a grand jury 
in Maryland recently returned a 34-count indictment against a physician 
for dispensing controlled substances without a legitimate medical 
purpose. I should note that this doctor has since turned in his medical 
license to the state of Maryland. The Department is actively working 
with state officials, both from attorneys general offices and state 
medical boards, to identify other doctors and pharmacists who 
unlawfully prescribe drugs online.
    The Department has also taken an active role in prosecuting website 
operators who illegally sell FDA-regulated products, such as unapproved 
drugs and devices, over the Internet. For example, in February 1999, a 
seller of bogus HIV self-test kits was sentenced to 63 months for mail 
fraud, wire fraud, and money laundering. We are also prosecuting cases 
against the operators of websites that sell the components necessary to 
make gamma hydroxy butyrate, commonly known as GHB, a dangerous 
unapproved drug often used in sexual assaults to incapacitate victims. 
Although I cannot discuss the details of these cases, I can say that 
the Department's efforts regarding GHB have made obtaining this drug 
over the Internet more difficult than it once was.
3. Coordination of Enforcement Efforts
    One of the most significant challenges we face in this area is 
coordination of enforcement policies and initiatives among a variety of 
federal, state, and other entities. We rely heavily, for example, on 
the hard work and dedication of federal and state investigating 
agencies in all of our cases. Our investigative agencies, with training 
and resources, will be able to develop cases that we can prosecute 
against online pharmacies and doctors affiliated with such pharmacies, 
should they dispense prescription drugs in ways that violate federal 
law.
    We have also engaged in and will continue to engage in substantial 
efforts to coordinate our work with that of FDA and other federal 
agencies. We will work closely with FDA as it begins to implement its 
action plan to address Internet drug sales. We are also endeavoring to 
coordinate with the FTC, the FDA, and the National Association of 
Attorneys General on issues such as the fraudulent or misleading 
marketing of prescription drugs over the Internet.
    Of equal importance is the need to train criminal investigators to 
deal with the special problems that Internet investigations pose. We 
have found that many websites that we are investigating disappear as 
quickly as they appear. If the site has not been ``mirrored'' or 
otherwise retained, an opportunity to take enforcement action 
disappears. It is vital that agents know how to conduct Internet 
investigations from their inception.
    In sum, the Department has taken and will continue to take an 
active role in coordinating with other federal agencies to respond to 
the potential risks to public health and safety that may accompany the 
growth of Internet sales of prescription drugs. We are participating 
with FDA and other agencies to explore what recourse is available to 
enforce existing laws that govern Internet prescription drug sales, 
particularly against foreign drug firms selling to U.S. consumers. As I 
have noted, foreign-based online pharmacies and their online sale of 
pharmaceutical drugs present particularly difficult and complex 
enforcement issues. We recently met with representatives from the FTC, 
FDA, FBI, the Customs Service, the Postal Service, and the National 
Association of Attorneys General to discuss this issue. With the other 
agencies, we will be evaluating existing laws and determining whether 
to recommend changes to address the problems we have identified.
    Thank you for the opportunity to present the views of the 
Department on this important topic. I would be pleased to answer any 
questions you might have.

    Mr. Upton. Thank you.
    Dr. Woodcock.

                   TESTIMONY OF JANET WOODCOCK

    Ms. Woodcock. Thank you for this opportunity to discuss the 
benefits and risks of pharmaceutical sales over the Internet. I 
was very happy to rearrange my schedule to accommodate this 
important hearing because this is a very significant issue for 
our agency.
    Now, at FDA, we regard the Internet as an important new 
tool that opens up vast opportunities for our citizens to share 
information, to communicate and engage in new forms of 
commerce, as other witnesses have already alluded to. It's 
rapidly becoming an essential mechanism that more and more 
Americans use for their personal and professional needs.
    The Internet also plays a prominent role in FDA activities. 
Our scientists use it to support regulatory research and to 
exchange data with scientists worldwide. We rely heavily on our 
Web site and other Internet tools to communicate drug 
information to consumers and health professionals and to inform 
industry and other FDA constituencies about our policies and 
procedures.
    And we applaud the fact that the Internet has facilitated 
drug dispensing by reputable pharmacies. As in other sectors, 
ethical Internet pharmacies can offer advantages to consumers 
such as speed and ease of ordering, wide product selection, on-
line pharmacists' consultation, reliable drug information and 
economic benefits of competition. But as a public health 
agency, we must be and we are concerned about emerging on-line 
practices that pose health risks to the public.
    Mr. Chairman, members of the committee, as you know, 
Congress has established a system of drug regulation that has 
served this country well. As part of this system, FDA protects 
consumers and patients by reviewing new medicines for safety 
and effectiveness and by monitoring their performance once 
marketed. The States also play a key role by licensing and 
oversight of the health care professionals, mainly medical 
doctors and pharmacists who are authorized to prescribe and 
dispense FDA-approved drugs.
    This traditional system that relies on professional 
accountability and responsibility to protect the public is 
being challenged by the Internet. There have always been 
unscrupulous people who have tried to circumvent the system by 
selling unapproved drugs, by selling drugs without a 
prescription, by offering expired or illegally diverted drugs 
or marketing products with fraudulent health claims. Any of 
these illegal practices may expose consumers to risk, such as 
life-threatening adverse drug effects, dangerous drug 
interactions or contaminated drugs. The power of the Internet 
to reach millions of unsuspecting consumers across all borders 
increases both the opportunity for these unscrupulous people 
and the magnitude of the public risk from their actions.
    In addition to the potential for expansion of illegal drug 
sales, we are also concerned about drug prescribing via the 
Internet based solely on the buyer's answers to a simple 
questionnaire outside of the context of a traditional 
physician-patient relationship. According to the AMA, the 
American Medical Association, a health care practitioner who 
offers a prescription for an unseen and unexamined patient 
based solely on an on-line questionnaire has generally not met 
an appropriate standard of medical care.
    Over the past several years, FDA has countered illegal on-
line drug sales by taking successful enforcement actions. We 
have not been idle in this regard. Today we are announcing a 
multifaceted program that is designed to intensify our efforts. 
We've committed to the following action plan, which is fully 
described in my submitted testimony. We will expand the 
agency's surveillance and enforcement activities on the 
Internet. We will enter into agreements with State regulatory 
and law enforcement officials to work cooperatively to enforce 
Federal and State laws against unlawful sellers and 
prescribers.
    We have signed principles of understanding with the 
National Association of Boards of Pharmacy and the Federation 
of State and Medical Boards. These principles have been 
endorsed by the American Medical Association and the APA.
    We will work with Congress and Federal agencies to address 
illegal Internet marketing by foreign sites, and we will expand 
our public health outreach activities to alert consumers to the 
risk, because, as we know from other areas, we must work on the 
demand side as well as the supply side of this problem.
    Over the coming year we will resource these initiatives by 
focusing on illegal Internet drug marketing, tapping resources 
that are currently focused on these illegal activities in a 
non-Internet context.
    We believe these initiatives are consistent with the 
administration's framework for global electronic commerce 
announced in July 1997, and the President's memorandum on 
successes and further work on electronic commerce issued last 
November.
    In conclusion, I want to give notice to those who are 
illegally selling drugs on the Internet that we are taking 
action. Misuse of the Internet for illegal sale of potentially 
dangerous drugs must stop.
    This concludes my oral testimony, and I will be glad to 
answer your questions.
    [The prepared statement of Janet Woodcock follows:]
    Prepared Statement of Janet Woodcock, Director, Center for Drug 
         Evaluation and Research, Food and Drug Administration
                              introduction
    Mr. Chairman and Members of the Committee, I am Dr. Janet Woodcock, 
Director, Center for Drug Evaluation and Research (CDER), Food and Drug 
Administration (FDA or Agency). I am pleased to have this opportunity 
to participate in this discussion of the benefits and risks of 
pharmaceutical sales over the Internet. The sale of consumer products 
over the Internet has grown rapidly, including the sale of drugs. While 
the growth in online drug sales by reputable pharmacies is a trend that 
can benefit consumers, online drug sales also present risks to 
unsuspecting purchasers and some unique challenges to regulators, law 
enforcement and policymakers. FDA is concerned about the public health 
implications of Internet drug sales, and we are responding to these 
concerns as part of our overall goal of developing and implementing 
risk-based strategies to protect public health and safety.
    It is important to recognize that other products regulated by the 
Agency, such as medical devices, biological products, and foods, 
including dietary supplements, also are sold online, and when sold 
unlawfully, may pose risks to the public health. This testimony, 
however, will focus on the advantages and risks of online 
pharmaceutical sales, outline the authority and enforcement activities 
of FDA in this area, and discuss new initiatives that FDA is taking to 
better respond to the regulatory challenges. FDA believes these 
initiatives are consistent with the Administration's July 1, 1997 
Framework for Global Electronic Commerce (Framework) and the 
President's November 30, 1998 Memorandum on Successes and Further Work 
on Electronic Commerce.
    The Framework suggested a set of principles to guide the 
government's approach as we face the new and ever changing challenges 
posed by the Internet. Five principles were articulated that apply to 
the policy questions raised by Internet prescription drug sales.
    These are:

1) The private sector should lead.
2) Governments should avoid undue restrictions on electronic commerce.
3) Where governmental involvement is needed, its aim should be to 
        support and enforce a predictable, minimalist, consistent and 
        simple legal environment for commerce.
4) Governments should recognize the unique qualities of the Internet.
5) Electronic Commerce over the Internet should be facilitated on a 
        global basis.
    In the context of prescription drug sales over the Internet, 
government should encourage private sector leadership in achieving a 
safe marketplace. The private sector has an important role to play in 
promoting consumer education and in providing seals of approval and 
other verification for legitimate sales. Government should refrain from 
imposing any unnecessary regulations, but should protect consumer 
health and safety through effective enforcement of existing law on 
illegal drug sales. If new regulations are needed these should be 
designed to support a predictable, minimalist, consistent and simple 
legal environment for commerce. Rapid technological developments will 
change the nature of the challenges we face today and we must remain 
flexible in developing solutions. Finally, the global nature of 
electronic commerce poses particular problems in the area of Internet 
drug sales and we should strive for consistent principles across State, 
national, and international borders that lead to safe and predictable 
results regardless of the jurisdiction in which a particular buyer or 
seller resides.
    As I will describe in more detail later in my testimony, FDA has 
developed and begun implementing an action plan to address the problems 
associated with online drug sales. The steps FDA is taking under its 
action plan include:

 The expansion of enforcement efforts against illegal online 
        sales. FDA has established priorities for taking enforcement 
        actions involving online sales, expanded its capability to 
        monitor violative Internet sites through advanced technology 
        search tools, and established a process to triage and monitor 
        ongoing cases. Using existing resources, through this process, 
        FDA expects to establish a higher profile enforcement presence 
        regarding unlawful online sales.
 FDA is working with other Federal agencies and State agencies 
        to better coordinate enforcement efforts. FDA worked closely 
        with the Federal Trade Commission (FTC) in developing the cases 
        announced as part of Operation Cure-All and has been working 
        with the Department of Justice (DOJ) and others regarding 
        online sales issues.
 FDA has initiated a series of meetings with State regulatory 
        bodies and other organizations to discuss better ways to 
        regulate online sales.
 FDA will expand public outreach efforts to warn consumers 
        about the dangerous practices involving online purchases.
    As described below, the Agency will seek to enforce existing 
statutory and regulatory provisions when illegal online drug sellers 
engage in unlawful conduct without imposing burdensome restrictions on 
legitimate sellers. Therefore, the Agency's efforts should help foster 
consumer confidence in electronic commerce through effective consumer 
protection online without imposing undue restrictions on legitimate 
electronic commerce.
                     benefits of online drug sales
    The growth and development of the Internet in recent years has 
opened up vast new opportunities for the exchange of information and 
for the enhancement of commerce. Electronic mail and chat groups have 
facilitated communications dramatically. Information gathering that 
once took hours or days of research, whether for a highly technical 
scientific paper or an elementary student's homework assignment, can 
now be accomplished in minutes.
    The Internet is rapidly transforming the way we live, work, and 
shop in all sectors of the economy. In the health sector, telemedicine 
allows people in remote areas to access the expertise of doctors in 
urban hospitals. The Internet permits increasing numbers of individuals 
to obtain medical information helping them to better understand health 
issues and treatment options. In fact, more than 22 million Americans 
used the Internet last year to find medical information. According to 
Investor's Business Daily, 43 percent of web surfers access health care 
data online each year. Health concerns are the sixth most common reason 
that people use the Internet, and according to the market research 
firm, Cyber Dialogue Inc., this number is growing by 70 percent a year.
    Legitimate prescription drug sales on the Internet can provide 
tremendous benefits to consumers. These benefits could include: lower 
prices through increased competition among licensed sellers; greater 
availability of drugs to shut-in people for whom going to the pharmacy 
can be difficult; increased availability to people who may live a great 
distance from the pharmacy; the ease of comparative shopping among many 
sites to find the best prices and products; and, greater convenience 
and variety of products for all customers who prefer online ordering of 
prescription drugs.
    Perhaps the chief attractions to purchasing consumer goods online 
are the speed and ease of choosing and ordering products. Many 
reputable online pharmacies allow patients to consult with a pharmacist 
from the privacy of their home. Moreover, online pharmacies are able to 
provide customers with written product information and references to 
other sources of information much more easily than in the traditional 
storefront. Finally, as the use of computer technology to transmit 
prescriptions from doctors to pharmacies expands, a reduction in 
prescription errors is possible.
    While online sales will be important for some customers, the more 
traditional pharmacies can offer benefits and services often not 
available through the Internet. Such pharmacies are an essential 
component in the delivery of effective health care.
    We are not aware if composite sales figures for online pharmacies 
have been compiled. But the increasing recognition of the Internet as a 
legitimate and important vehicle for drug sales is evidenced by the 
recent activity of major drugstore companies and Internet retailers in 
financing, supporting and sponsoring online pharmaceutical outlets. 
Earlier this year, for example, CVS Corporation acquired the online 
pharmaceutical retailer Soma.com, and announced last month that the 
online retail sites of the two companies will merge. Also last month, 
Rite-Aid Corporation announced a partnership with Drugstore.com to 
combine the benefits of online ordering with access to traditional 
retail locations and insurance reimbursement services. We expect this 
expansion of the online drug sales industry to continue over the next 
few years.
    As beneficial as this new technology is, however, there are some 
concerns. The Internet also creates a new marketplace for sales that 
are already illegal in the non-wired world (and wired world), such as 
unapproved new drugs (including counterfeit drugs), prescription drugs 
marketed without a valid prescription, and products marketed with 
fraudulent health claims. The unique qualities of the Internet, 
including its broad reach and ability for anonymity, pose new 
challenges for the enforcement of existing laws. The global nature of 
the Internet creates particular problems for effective law enforcement. 
Different approaches to drug approval and marketing in foreign 
countries further complicate law enforcement issues for U.S. officials. 
FDA and other U.S. government agencies will need to work closely with 
foreign governments to share information on the drug approval process 
and develop mechanisms to cooperate on law enforcement with respect to 
certain prosecutions.
    The challenge for government is to promote policies that will allow 
legitimate electronic commerce to flourish by creating a marketplace 
where consumers can have confidence in the quality of the medical 
prescription and of the medicine delivered. A safer marketplace can be 
fostered through effective enforcement of existing laws and by taking 
steps to encourage programs that provide certification, or seals of 
approval, to legitimate doctors and pharmacists operating in the 
virtual world.
                      concerns about online sales
    As you know, the establishment of FDA as it exists today grew out 
of a time early in the century when consumers were victimized by 
dishonest purveyors of fraudulent potions and compounds that were 
ineffective, dangerous, or both. A system of drug regulation was 
established in this country that has served us well. Under this system, 
FDA reviews new drugs to ensure their safety and effectiveness. In 
addition, certain types of drugs must be prescribed and dispensed by 
health care professionals licensed and overseen by the State in which 
they practice. But even with this system in place, there are those who 
still try to sell unapproved or unsafe drug products, and the Internet 
provides them with new opportunities for reaching unsuspecting and 
vulnerable consumers and undermining established safeguards. It is fair 
to say that the speed and ease of ordering products on the Internet 
that attract consumers likewise entices some unscrupulous sellers to 
use the Internet as their new medium of choice. Unlike some other forms 
of electronic commerce, the unauthorized sale of prescription and 
unapproved drugs poses a potential threat to the health and safety of 
consumers. Moreover, consumers who are desperate for a cure to a 
serious medical problem are particularly vulnerable. Thus, they may be 
more susceptible to the hype surrounding an unapproved product or more 
likely to fall prey to the sale of an adulterated product.
    Internet drug sales raise public health issues similar to those 
raised by sales, in other contexts, of unapproved new drugs (including 
counterfeit drugs); the sale of prescription drugs without a valid 
prescription; the sale of expired or illegally diverted 
pharmaceuticals; and the marketing of products based on fraudulent 
health claims.
    Congress and State legislatures have enacted laws to protect 
patients from harm resulting from the use of unsafe drugs, counterfeit 
drugs, and the improper practice of medicine and pharmacy. Under these 
laws, to receive a prescription drug for the first time, generally a 
patient must be physically examined by a licensed health care 
practitioner who determines the appropriate treatment and issues a 
prescription for an FDA-approved drug. The patient then has the 
prescription filled by a registered pharmacist working in a licensed 
pharmacy that meets State practice standards. However, the Internet 
makes it easy for individuals to bypass these safeguards when selling 
drugs to patients. A web site can be easily created to look like a 
legitimate pharmacy when in fact both the seller and product are 
illegitimate.
    Patients who buy prescription drugs from an illegitimate site are 
at risk of suffering life-threatening adverse events. For example, one 
type of dangerous product commonly sold on the Internet is a kit for 
preparing gamma hydroxy butyrate (GHB). This unapproved drug, which is 
sold for bodybuilding and recreational use and is used also in sexual 
assaults to incapacitate the victims, is a clear threat to public 
health when sold in this manner. Other risks include potential side 
effects from inappropriately prescribed medications, dangerous drug 
interactions and contaminated drugs, as well as the possible ill 
effects of impure or unknown ingredients found in drugs manufactured 
under substandard conditions. Further risk to patients is posed by 
their inability to know what they are really getting when they buy 
these drugs. Although some patients may be purchasing the real thing, 
some may be buying counterfeit copies that contain inert ingredients, 
outdated legitimate drugs that have been diverted to illegitimate 
resellers, or dangerous sub-potent or super-potent versions that were 
improperly manufactured.
    Besides magnifying existing problems by reaching millions of 
consumers worldwide, online drug sales create unique issues for 
regulatory and law enforcement bodies. Internet technology can obscure 
the source of the product as well as the persons responsible for making 
and shipping the product. The participants in a transaction can be 
widely dispersed geographically and they may well never meet. For 
example, a consumer in one State, using an Internet site emanating from 
a computer in a second State, may order a drug actually dispensed from 
a third State, under a prescription from a doctor in a fourth State. 
Thus, issues cross traditional regulatory boundaries as well as Federal 
and State jurisdictional lines. If one or more participants in the 
transaction are located outside of the United States, the task of 
regulating the activity is further complicated. Similarly, the fact 
that sellers can easily change the location and appearance of their 
Internet sites makes enforcement all the more difficult.
    The Agency is particularly concerned about the apparent absence of 
a doctor-patient relationship in some Internet transactions. FDA 
believes that the selection of prescription drug products or treatment 
regimens for a particular patient should be made with the advice of a 
licensed health care practitioner familiar with the patient's current 
health status and past medical history. In situations where the 
customary physician-patient relationship does not exist, the patient is 
essentially practicing self-diagnosis. Consequently, the risk of 
negative outcomes such as harmful drug interactions, allergic 
reactions, contraindications, or improper dosing is greatly magnified. 
We also are concerned about the proliferation of sites that substitute 
a simple questionnaire for a face-to-face examination and patient 
supervision by a health care practitioner. Another concern in such 
situations is that the legal protections for privacy of medical 
records, which the Administration strongly supports, may not be 
available. According to the American Medical Association, a health care 
practitioner who offers a prescription for a patient they have never 
seen before and based solely on an online questionnaire has generally 
not met the appropriate medical standard of care.
    The sale of drugs to U.S. residents via foreign web sites is 
another area of concern to the Agency. Some medications sold on the 
Internet may be legal in foreign countries but not approved for use in 
the United States, and some products may include addictive and 
dangerous substances. Products not approved for sale in the United 
States generally do not conform to the good manufacturing practices and 
quality assurance procedures required by U.S. laws and regulations. 
Generally, the prescription drug available from a foreign pharmacy is 
either a product for which there is no U.S. approved counterpart or a 
foreign version of an FDA-approved drug. It is illegal for a foreign 
pharmacy to ship such drugs into the U.S. Additional requirements, 
enforced by the Drug Enforcement Administration, are imposed on the 
importation of controlled substances. Foreign sales pose a difficult 
challenge for U.S. law enforcement because the seller is not within 
U.S. jurisdiction.
                 fda authority and enforcement activity
    The types of unlawful conduct involving online drug sales that FDA 
has identified are similar to unlawful activities that occur in other 
sales contexts. Under the Federal Food, Drug, and Cosmetic (FD&C) Act, 
FDA has the legal authority to take action against:

 the importation, sale, or distribution of an adulterated or 
        misbranded drug;
 the importation, sale, or distribution of an unapproved new 
        drug;
 illegal promotion of a drug;
 the sale or dispensing of a prescription drug without a valid 
        prescription; and,
 counterfeit drugs.
    When the Internet is used for an illegal sale, FDA must establish 
the same elements of a case, bring the same charges, and take the same 
actions as it would if another medium, such as a storefront or a 
magazine, had been used.
    FDA already has investigated and referred cases for criminal 
prosecution and civil enforcement actions against some online sellers 
of drugs and other FDA-regulated products, particularly sellers of 
drugs not approved by the Agency. FDA intends to significantly expand 
its enforcement activities regarding online sales. The Office of 
Regulatory Affairs (ORA) and the Office of Compliance in the Center for 
Drug Evaluation and Research (CDER) are the primary organizations 
within FDA with responsibility for regulating online drug sales. These 
offices review web sites that consumers, industry, health professionals 
or government personnel report as appearing violative. Since June 1998, 
the Agency has taken numerous compliance actions based on violative 
labeling claims. In at least 27 of these cases, the violative claims 
had an Internet component. To date, the Agency has identified over 60 
cases related to suspected illegal Internet sales, with the first 
Internet prosecution having been undertaken in 1994. Actions included 
sending warning letters to firms illegally selling unapproved new drugs 
online and issuing Import Alerts to online sellers of illegal foreign 
pharmaceuticals. FDA has also contacted web site managers and asked for 
their voluntary cooperation in removing violative sites. Warning 
letters to online pharmacies based in foreign countries are shared with 
the government of that country. Additionally, CDER's Division of Drug 
Marketing, Advertising, and Communications has taken steps against 
online drug promotion that violates the FD&C Act by making 
unsubstantiated claims or misrepresentations of drugs, or by a lack of 
fair balance in describing risks and benefits.
    The Office of Criminal Investigations (OCI) is the entity within 
FDA responsible for conducting and coordinating investigations of 
suspected criminal violations of the FD&C Act, the Federal Anti-
Tampering Act (FATA), and other statutes including applicable U.S. 
Criminal Code violations. OCI maintains liaison and cooperative 
investigative efforts with other Federal, State, Local, and 
international law enforcement agencies.
    In November 1998, a defendant in California began serving a five 
year Federal prison term after being convicted of selling online 
unapproved HIV home test kits which used fabricated test results. For 
the first time in FDA history, the individual was convicted on wire 
fraud charges stemming from the use of the Internet to sell an illegal 
medical product. Previous wire fraud charges involving illegal medical 
products were based only on telephone and facsimile use.
    In another case, in November 1998, a police department in Illinois 
advised OCI it had discovered an unconscious male individual in a hotel 
parking lot. The subject was taken to a local hospital and treated for 
a drug overdose. Police contacted family members and determined that 
the individual had been taking GHB. Police found suspected GHB in the 
subject's possession and found additional suspected GHB in his hotel 
room. Police requested OCI assistance with lab work and a technical 
computer search as they suspected the subject had obtained GHB kits and 
preparation instructions from the Internet. OCI identified the 
subject's source of supply, which was on an Internet site located in 
Canada. The investigation by OCI and the police department established 
that the subject had purchased a quantity sufficient to warrant a GHB 
felony distribution charge under Illinois law. The individual was found 
guilty of possession of a controlled substance in Illinois and 
sentenced to two years state probation.
    In a third case, OCI was advised by a State Board of Pharmacy that 
an Internet site was offering prescription drugs to U.S. customers from 
foreign manufacturers, by acting as an authorized ``buyers club'' using 
the ``personal importation policy'' of FDA. OCI notified the U.S. 
Customs Service (USCS) at a particular U.S. international mail facility 
to watch for suspicious shipments bound for the operator of this 
Internet site. As a result, USCS intercepted what appeared to be 
steroid shipments to the web site's address. Search warrants were 
obtained and over a period of approximately four weeks, nine incoming 
shipments of steroids were searched and control delivered by USCS and 
OCI agents. Deliveries coordinated with surveillance of the suspect 
revealed a sophisticated operation centered out of an apartment 
building. OCI and USCS arrested the suspect and simultaneously served a 
search warrant at the business location. The primary suspect was 
sentenced in Federal court.
    As a last example, in July of 1996, OCI headquarters was contacted 
by a women's health care provider to advise that several clients had 
directed her to an Internet site promoting an abortion kit. She 
believed the site contained several unfounded statements. The FDA 
Division of Urology and Reproductive Drug Products reviewed the 
Internet site and determined that the drugs in the kits presented a 
serious health risk to women when used without a doctor's supervision 
because of a possibility of heavy vaginal bleeding and death. Using 
computer technology and the help of computer security companies, OCI 
traced the site to Easy Life Labs in Colombia, South America. OCI 
placed an anonymous order for the kit. The company responded and FDA 
laboratory analysis showed the drugs to be those warned against by the 
Agency's experts. The company's web site temporarily went off line, but 
in March of 1997, the original health care provider called back to say 
the company was operating again using a different name. One of the 
drugs provided was unapproved for use in the U.S. OCI contacted the 
foreign drug company's U.S. Internet service provider (ISP) and told 
them that one of their subscribers was using its service to promote and 
sell this unapproved drug. Additionally, the ISP was informed of FDA's 
public health concerns about the proposed use of the unapproved drug 
and that this was in criminal violation of the FD&C Act. The service 
provider voluntarily removed the violative ads.
    Although FDA has taken action against unapproved drugs sold over 
the Internet and will continue to do so in the future, as you know, FDA 
does not generally regulate the practice of pharmacy or the practice of 
medicine--the States traditionally have regulated both the prescribing 
and dispensing of drugs. Several States, however, have found it 
difficult to identify and locate violators and to bring effective 
enforcement actions because the seller and the purchaser of a drug may 
reside in different States and because it is often difficult to 
identify the persons responsible for a web site. As a result, FDA and 
State agencies need to work cooperatively to enforce the FD&C Act and 
State laws in this area.
    FDA has initiated contacts with other agencies and States to 
address these issues. For example, on February 8 of this year, the 
Agency hosted a meeting with representatives of health professional 
organizations that looked at the prescribing and dispensing of drugs on 
the Internet. FDA, the Federation of State Medical Boards of the United 
States, the National Association of Boards of Pharmacy (NABP), the 
American Medical Association and the Association of Food and Drug 
Officials gave presentations. Discussions centered on the roles that 
each organization plays in regulating prescribing and dispensing on the 
Internet and how the various roles could better compliment each other. 
At that meeting, the NABP announced a new program to verify the 
legitimacy of Internet sites dispensing prescription drugs. The 
program, known as the Verification of Internet Pharmacy Practice Sites, 
or VIPPS, will provide a NABP ``seal of approval'' to sites meeting the 
organization's standards. Over time, this seal of approval may assure 
consumers that the designated sites are offering FDA approved 
pharmaceuticals.
    FDA believes that by working with the States, we can regulate the 
domestic sale of both approved and unapproved drugs (except for 
controlled substances where the Drug Enforcement Administration 
generally takes the lead for the Federal government), as well as the 
sale of prescription drugs without a valid prescription. When a sale 
involves health fraud, multiple Federal agencies have authority to take 
action, including the Department of Justice, the Federal Bureau of 
Investigation, the Federal Trade Commission, the Postal Service, the 
Office of the Inspector General in the Department of Health and Human 
Services and FDA. The States also have similar authority. FDA has 
worked with many of these agencies in bringing cases involving health 
fraud and will continue to do so.
    The most difficult problem to address is the online sale of drugs 
to U.S. residents by sellers in foreign countries. FDA, and the other 
Federal agencies and State bodies, possess limited jurisdiction over 
sellers in foreign countries and must work with foreign governments to 
bring action against such individuals. FDA, the Customs Service, the 
Postal Service, and the Drug Enforcement Administration have greater 
authority to stop drugs imported illegally into the United States when 
the product reaches the U.S. border. These agencies have been 
successful in stopping some products from entering the country. The 
difficulty of finding these products at the border makes this a very 
challenging task. The sale of drugs to U.S. residents by foreign 
sellers poses the greatest challenge for the Federal government.
                 fda's internet drug sales action plan
    FDA has drafted an action plan outlining expanded activities the 
Agency will take to address the unlawful sale of drugs over the 
Internet. This plan is based on internal deliberations, meetings with 
Federal and State regulatory and law enforcement bodies, as well as 
organizations representing consumers, health care practitioners, and 
the pharmaceutical and pharmacy industries. FDA has identified five 
major areas of focus pertaining to the regulation of online drug sales, 
which are to:

 customize and expand the Agency's regulatory and criminal 
        enforcement efforts;
 identify when and with which Federal agencies FDA should 
        partner in joint activities;
 partner with State bodies to address domestic Internet sales;
 engage in public outreach; and,
 provide input to Congress regarding legislation.
1) Customize Enforcement Efforts
    FDA's role in regulating online drug sales should be consistent 
with its traditional regulatory role. We also believe that, given the 
Agency's current limited resources, our existing approaches to 
enforcement should be adapted to focus more effectively on the problems 
posed by online drug sales. An effective Internet enforcement process 
requires establishing priorities, identifying and monitoring 
potentially violative web sites and making appropriate referrals for 
criminal prosecution and/or refer/pursue civil enforcement. The 
Internet action plan calls for FDA to enhance its enforcement efforts 
by undertaking the following actions.
    Establish Priorities--FDA will initially focus its online drug 
sales-related enforcement activities to the following areas, 
particularly where there is a significant public health risk: 
1
---------------------------------------------------------------------------
    \1\ A significant public health risk exists when a consumer is at 
risk for harm (1) from the use of the product, (2) as the result of not 
taking approved drugs for a specific disease or condition, or (3) by 
delaying medical treatment recognized as safe and effective for a 
specific disease or condition.

 Unapproved new drugs,
 Health fraud,
 Prescription drugs sold without a valid prescription.
    Increase Data Acquisition--FDA will expand its capability to 
monitor the Internet and identify violative sites by acquiring an 
advanced search tool and upgrading its data capabilities. This will 
allow the Agency to determine the kind and extent of unlawful conduct 
on the Internet and provide a measurement by which the Agency can judge 
whether its enforcement efforts have had an impact on illegal Internet 
behavior.
    Coordinate Triage--The Agency has established a three-member case 
assessment team with representatives from the Office of Enforcement and 
OCI within the Office of Regulatory Affairs (ORA) and from CDER. This 
team will evaluate violative sites; and make appropriate referrals for 
criminal prosecution and/or refer/pursue civil enforcement; and, ensure 
that criminal and civil enforcement actions are efficiently 
coordinated. Any Agency employee who identifies a potential violation 
on the Internet will refer the information to the team. This process 
should ensure that decisions are made in a timely way with appropriate 
balance in terms of achieving a maximum deterrent effect while taking 
action, if needed, to remove harmful products from the market. The team 
will continue to oversee Internet-related enforcement activities while 
they are being investigated and will ensure that they are brought to 
appropriate completion.
    Increase Enforcement Presence--FDA believes that to effectively 
curb unlawful conduct involving online drug sales, more cases must be 
pursued. To do this, the Agency will draw from existing activities to 
increase its current enforcement efforts because we believe that 
illegal online drug sales pose a significant public health risk. The 
Agency will begin this effort with a modest reallocation of current 
fiscal year funds.
2) Identify Federal Agency Partners
    Several Federal agencies, as well as the States, have the authority 
to regulate and/or enforce U.S. laws related to the sale of drug 
products online. Due to the growth of potential cases involving the 
Internet, there may be instances when working with another agency or 
State could result in a more effective enforcement action. In fact, FDA 
worked closely with FTC in developing the Operation Cure-All cases and 
also has been working with DOJ and State regulatory bodies.
    To ascertain whether and when FDA should coordinate efforts with 
one or more governmental bodies, above and beyond the relationships 
that exist today, the Agency has researched the roles that the various 
Federal and State bodies should play regarding online drug sales. FDA 
also has met with several of those agencies, as described above, to 
identify opportunities for partnering in enforcement actions.
    FDA believes that an important area where cooperation among Federal 
agencies can be quite beneficial is the sale of drugs to U.S. residents 
by foreign sellers. The Customs Service, the Postal Service, FDA, and 
the Drug Enforcement Administration all play important roles in taking 
action against the illegal importation of drugs. However, the Federal 
government's limited ability to bring enforcement actions against 
sellers in other countries, as well as the feasibility of stopping 
drugs from entering the United States, pose difficult challenges for 
law enforcement. Generally, a determination of when and with whom FDA 
would engage in joint enforcement should be based on the kinds and 
severity of violative conduct identified through continuous Internet 
monitoring. Although FDA is expanding its Internet monitoring 
capabilities, the Agency also is developing partnering arrangements 
with other agencies. In addition, FDA will participate in any 
Administration-led working groups that address online drug sales.
3) Partner with State Bodies and Other Organizations
    FDA has met with and continues to meet with organizations 
representing State regulatory and law enforcement bodies, consumers, 
health care practitioners and industry. The purpose of these meetings 
is to gather information on 1) how issues relating to online drug sales 
should be addressed, 2) who should regulate and how they should 
regulate, 3) whether and what changes to the current law should be 
enacted, and 4) when to develop partnering arrangements. These 
organizations include:

 the National Association of Boards of Pharmacy,
 the Federation of State Medical Boards,
 the National Association of Attorneys General,
 the American Medical Association,
 the American Pharmaceutical Association,
 the American Association of Retired Persons,
 the National Consumers League,
 the American Society of Health-Systems Pharmacists,
 the National Association of Chain Drug Stores,
 the National Community Pharmacists Association, and,
 the Pharmaceutical Research and Manufacturers Association.
    FDA believes that illegal selling and prescribing of approved 
prescription drugs over the Internet can be effectively addressed 
through cooperative efforts by FDA and the States. FDA is drafting 
partnering agreements with several State bodies to coordinate Federal 
and State activities aimed at illegitimate sellers and prescribers of 
prescription drugs.
4) Engage in Public Outreach
    Every drug sale involves at least a purchaser and a seller. 
Although different purchasers buy drugs on the Internet for different 
reasons, all may be targets of unscrupulous business practices, such as 
the selling of unsafe, expired, or counterfeit drugs. Public outreach 
offers one mechanism by which the Agency can help protect consumers 
from dangerous or inappropriate drugs. Using the following media, FDA 
will expand its public outreach to explain what compliance and 
enforcement actions we already have taken and to inform the public 
about dangerous practices involving Internet purchases:

 Talk papers
 Articles in FDA Consumer Magazine
 Information on FDA's web site to inform consumers about what 
        to avoid if purchasing drugs online, for example, buying 
        prescription drugs without a prescription
 Work with the media.
    The Agency also chairs the public education subgroup of the 
Interagency Internet Sales Working Group. The subgroup met last week to 
begin addressing whether and in what coordinated outreach activities 
the Federal agencies could engage. Some agencies have already issued 
educational materials. The subgroup will seek to build on existing 
activities and avoid pursuing duplicative efforts.
    Finally, the Agency will keep working with consumer groups, health 
care practitioner organizations, and industry to encourage these 
parties to keep their constituents and the public informed about safe 
practices for purchasing drugs online.
5) Provide Input to Congress Regarding Legislation
    Congress did not enact the current laws governing drug sales with 
the Internet in mind. Additional fact-finding will be needed to 
determine whether and to what extent existing regulatory and law 
enforcement frameworks do not adequately address Internet-related 
conduct. FDA believes that any decision to pursue new legislation 
should be made only after a careful and thorough analysis of the issues 
based on sufficient information, including discussions with relevant 
non-governmental bodies. FDA has met with and continues to meet with 
Federal and State governmental bodies and non-governmental 
organizations to obtain their perspectives on how online drug sales 
should be regulated. Where appropriate, the Agency will provide input 
to Congress regarding whether and what legislation is needed in this 
area.
                               conclusion
    Mr. Chairman, online shopping for pharmaceutical products clearly 
provides certain benefits for consumers. But it also has a number of 
risks. Additionally, the nature of this technology presents law 
enforcement and policy makers with unique challenges. FDA is grappling 
with the challenges posed by online drug sales, and with our need to 
carefully balance consumer access to information and products with 
protecting the public health. We believe we can adapt our compliance 
and enforcement techniques to the new electronic marketplace, and we 
will continue to assess what changes in our procedures or the law might 
be appropriate. We look forward to working with Congress on this 
important issue.
    I would be happy to answer any questions you may have.

    Mr. Upton. Well, thank you very much.
    You know, as we began to get evidence for this hearing and 
began to schedule it, and Mr. Klink and I talked a number of 
times over the last number of months in terms of the problems, 
and you were here for the first panel, and whether it be our 
own local media in our own districts or really across the 
Nation, it seems like this is just the tip of the iceberg. I 
mean, if any dog or cat can get this, or folks that have been 
dead for decades, with pretty relative ease, 9-, 10-year-olds 
as well, we have a problem. We have a big problem.
    As we listen to our own Attorney General speak, and again, 
for Kansas, they are looking after six--only six cases that 
they have identified, but just because of those six cases, all 
of the sudden many of the Internet pharmaceutical groups have, 
in fact, said Kansas is the State that we don't want to mess 
with, let us look at the other 49.
    Mr. Fong, you indicated at the end of your testimony that 
the act of dispensing drugs illegally and improperly is, in 
fact, a Federal offense and that you stand ready to prosecute 
those in violation. How many--I mean, knowing some of the 
evidence that we have seen today, how many cases are you 
actively pursuing at this time?
    Mr. Fong. We have, as I indicated in my testimony, been 
working with our investigative agencies. We work in 
partnership. We are at the tail end of the process in many 
ways, and we are only a piece of the puzzle, but we are in the 
process of working on investigations, and I can't tell you 
today that we have complaints that we've filed in this area, 
but we have filed numerous actions in analogous situations 
involving precisely the fact pattern that you mentioned, as I 
indicate in my written testimony, cases against individuals 
selling unapproved drugs as well as drugs without a 
prescription, steroids for example.
    Mr. Upton. So there are cases pending?
    Mr. Fong. Some of these cases are more than pending. Some 
individuals have been sentenced.
    Mr. Klink. Will the gentleman yield to me for a moment?
    Mr. Upton. Sure.
    Mr. Klink. Could you tell us how many cases there have 
been, not necessarily now, but could you present the 
subcommittee with verification as to how many cases there are 
and what the adjudication has been of those cases?
    Mr. Fong. I can certainly ask and get back to you.
    Mr. Klink. Thank you.
    [The following was received for the record:]

    From September 1985 to May 1999, there were 236 convictions 
of distributing drugs without prescriptions: 151 steroid cases; 
59 animal drug; and 26 GHB.

    Mr. Upton. Ms. Bernstein, there was--when you get your 
picture in the Wall Street Journal, that's always sort of an 
extra little mark, prominence. In a story today by John Simons, 
it indicates that Ms. Bernstein is watching, but she walks a 
fine line within the Clinton administration, which has a hands-
off stance toward Internet regulation. The administration would 
prefer that the industry police itself. Yet in your testimony 
you indicated that you do think you would support the mandating 
of--the posting of information, similar, I would presume, to 
some of the thoughts Mr. Klink raised with the earlier panel.
    Who is speaking for the administration on this, as we have 
heard from Dr. Woodcock and Mr. Fong, and is this statement on 
the mark in terms of what the Journal reported today?
    Ms. Bernstein. Mr. Chairman, I guess John Simons wasn't 
sworn as I was this morning, but I think the Journal statement 
is correct.
    Mr. Upton. He may be over here. I don't know what he looks 
like so----
    Ms. Bernstein. I think that statement was--was correct. The 
Commission voted to support legislation that required the 
disclosure of that identifying information. I do not believe 
the administration has objected to the Commission's position on 
that. Does that respond to your question?
    Mr. Upton. Well, the comment in the story says that the 
administration would prefer that the industry police itself. So 
that would seem to the casual reader that they would oppose 
legislation that you commented on.
    Ms. Bernstein. Let me expand further if I may, Mr. 
Chairman. The administration has favored a self-regulatory 
approach on the Internet in connection with privacy 
particularly; that is, generalized privacy protection, not on 
this issue where existing laws have already been violated, and 
do raise public health concerns. The Federal Trade Commission 
has supported that nonregulatory position in connection with 
privacy as well. So I view them as different issues, if you 
will, and I believe the Commission and the administration do as 
well.
    Mr. Upton. My time has expired. I yield to Mr. Klink.
    Mr. Klink. Mr. Chairman, before I begin my questioning, 
might I take care of a bit of housekeeping with you? I would 
ask unanimous consent that at this point in the record that the 
majority and minority counsels work together to insert into the 
record at this point in the hearing all of the correspondence 
between our subcommittee and committee with the agencies 
represented on this panel and their responses.
    Mr. Upton. Without objection.
    Mr. Klink. Thank you, Mr. Chairman.
    [The information referred to follows:]
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    Mr. Klink. In response, and in the same vein, Dr. Woodcock, 
on June 14 we sent to Commissioner Henney a letter asking a 
number of questions, and we finally did get a response. It took 
a great deal of time, but in the response absent was response 
to question number 4, and you won't need the letter in front of 
you. I will read this to you. We asked as part of the response, 
please provide the committee the following information 
regarding the enclosed copies of Internet sites--and you saw 
the stack of sites if you were here earlier--the physical 
location of the site; what State they sell their products in; a 
description of the products sold through the site; the source 
of such pharmaceutical products sold through the site; whether 
the site is licensed in the U.S.; if so, by what States; if not 
licensed in the U.S., please determine whether the site is 
licensed by a foreign regulatory authority; or, if at all, 
whether the site has ever been reviewed; the site for any 
advertising or usage claims made in regard to any 
pharmaceutical product sold, and the accuracy of such claims 
that were made by the site that fall under FDA's jurisdiction.
    Those items were not responded to. I would simply ask if 
you would work post haste, if you could, when you get back to 
FDA, to see if we can get some responses to that because this 
really gets to the guts of the matter that we are dealing with 
here.
    Ms. Woodcock. Certainly. I think it also illustrates that a 
lot of investigative work is required at the current time for 
any site to get the kind of information that you're talking 
about for any site that's simply a--a Web site in cyberspace. 
It requires a fair amount of investigation to see what's 
actually behind that, and it may be, as other witnesses said, 
that numerous other corporations or entities may be involved in 
shipping, billing, obtaining medicine and so forth.
    [The following was received for the record:]

    The June 14, 1999 letter from the Chairman and various 
Members of the Commerce Committee asked several detailed 
questions regarding 104 web sites, primarily selling Viagra, 
that were enclosed with the letter. In our July 30 response 
letter, we indicated that FDA had not developed information at 
that time on most of the Internet web sites. FDA has performed 
WHOIS searches on domain name registrars to identify the 
administrators of these operations and their locations. A WHOIS 
search enables persons to obtain information about or related 
to a domain name registration record.
    The results of these WHOIS searches indicate that 75 of the 
sites list a domestic address and 28 list a foreign address. 
Using the basic information obtained from this search, FDA is 
further evaluating the sites using the process described in our 
testimony of July 30. The Agency's Internet case assessment 
team (consisting of representatives from the office of 
Enforcement and the Office of Criminal Investigations (OCI) 
within the Office of Regulatory Affairs and a representative 
from CDER) is reviewing information on the sites and will make 
referrals for further investigation, as appropriate, to FDA 
compliance and field offices and to state regulatory agencies 
and/or pharmacy board representatives. If warranted, such 
referrals could result in regulatory compliance or civil 
enforcement actions, professional board disciplinary actions, 
or criminal prosecution.
    We will provide the Committee with additional information 
as our evaluations and activities proceed.

    Mr. Klink. If I could just interrupt, I know there's a lot 
of work, I know there's a lot of sites, and we held them up. We 
sent the same letter to the Federal Trade Commission after we 
sent the letter to the Food and Drug Administration. They were 
able to answer, and you weren't, and I am bothered by that. I 
am troubled. They showed up, they have their analysis, and we 
have nothing by the FDA.
    Can you tell us what--how many people are being put on the 
case to determine how many of these sites are and whether or 
not you believe that any of them have the appropriate State 
licenses? How many people are looking at that, and do you have 
any determination as to whether or not any of these sites are 
licensed and how many there are?
    Ms. Woodcock. What we have found is 104 sites.
    Mr. Klink. You found 104?
    Ms. Woodcock. Yes.
    Mr. Klink. We found 200. So apparently we have done a 
better job of looking for the Easter eggs than you have. Does 
that bother you? We have got three people on the minority side 
staff. How many people do you have working at the FDA?
    Ms. Woodcock. Total people at the FDA?
    Mr. Klink. Yeah, how many total people?
    Ms. Woodcock. There are 9,000 people.
    Mr. Klink. You have 9,000; we've got three. You found 104; 
we found over 200, and we're still finding, and we understand 
there is over 400. That is troublesome. How many of the 9,000 
people are working on this?
    Ms. Woodcock. I can't give you a specific answer.
    Mr. Klink. Do you suppose that you can later on once you go 
back and check it out?
    Ms. Woodcock. Yes.
    [The following was received for the record:]

    At the present time, there are four people reviewing the 
104 web sites provided by the Committee. These individuals have 
been assisted by additional staff at various times, including 
persons providing technical assistance. It should be stressed 
that review of these sites is an involved process. A web site 
is examined and a full check is run on all of the potential 
links as well as the data known about the web site itself. This 
entails a complete analysis through various databases 
identifying all known addresses, credit records, law 
enforcement records and other comprehensive information. As the 
review progresses and expands, more people are being involved. 
The number of people will increase again if the Internet 
assessment team determines there is a need to pursue additional 
action with respect to any Internet site.
    There are about 10 FTEs (full time equivalent personnel) 
devoted to the issue of regulating illegal activity in which 
the Internet may play a role. It is anticipated that this will 
increase gradually to 20 FTEs as resources are shifted to 
address the increased activity expected in this area.

    Mr. Klink. I understand that you made an announcement today 
that you are going to expand your surveillance, and I mentioned 
before this panel came up, we've had promises before that this 
is a new day, we have got a new task force, we have got a new 
initiative. Yet you come here today to say that you have seen 
104 sites. How many of those sites are licensed?
    Ms. Woodcock. I will have to consult with my colleagues.
    Mr. Klink. Of the sites you looked at, of the 104 you 
found, how many actually have a license?
    Ms. Woodcock. I'd like to introduce Jeff Shuren if I may.
    Mr. Klink. Jeff, are you sworn in?
    Mr. Shuren. No, I'm not.
    Mr. Klink. Mr. Chairman, would you swear him in, please.
    [Witness sworn.]
    Mr. Klink. If you'd introduce yourself, speak into the 
mike.
    Mr. Shuren. My name is Jeffrey Shuren. I'm a medical 
officer at the FDA.
    The 104 sites we were referring to are the sites that you 
sent to us, and what we did is----
    Mr. Klink. So you found the sites that we sent to you?
    Mr. Shuren. No. You asked us to look at those sites.
    Mr. Klink. Oh, okay. How many sites are you aware of total 
then?
    Mr. Shuren. An exact number I can't tell you. We've looked 
at hundreds.
    Mr. Klink. Hundreds; 200's, 300's, 400's, 900's? There are 
hundreds. There's a lot of hundreds. Give us an idea, if you 
would.
    Mr. Shuren. I'd be estimating. I'd say to the 300 to 400's 
at this point.
    Mr. Klink. 300 to 400. How many of those are licensed?
    Mr. Shuren. I could not tell you the number that are 
licensed.
    Mr. Klink. Are you looking at how many of them are 
licensed, and what methodology are you using to determine, A, 
how many sites there are and, B, whether or not they are 
licensed?
    Mr. Shuren. Well, in terms of whether the site is licensed 
as a pharmacy, traditionally the States have regulated that. We 
do not have authority over the licensing of pharmacies. In 
fact, under our statute pharmacies are exempt from registering 
with FDA. What we did do with those sites that you sent to us, 
is conduct a ``who is'' search on domain name registrars to try 
to find out the name of the contact person and the location of 
those sites. As a result of this search, we found that 75 of 
those sites are domestic, 28 of those sites are foreign.
    Mr. Klink. Now, where does the consumer go today to 
determine whether or not it is safe to buy pharmaceutical 
supplies or pills or whatever else from these sites? We have 
already heard from the States. They are ill-equipped. These 
things are coming in from outside the country. They are post 
office boxes and warehouses that are moving around from one 
location to another. We have discussed with the FDA, with the 
Department of Justice, with the FTC all of these problems for 
many months. Where does the consumer go to find protection? And 
if we are so concerned about not impeding the growth of the 
Internet, what about those students that Ms. Egan told us about 
in the past panel from Philadelphia who acquired the ingredient 
from cough syrup over the Internet and were injured? And what 
about the potential for death from taking these drugs? Who is 
protecting the American public? Which one of your agencies is 
doing it? What activities have you undertaken in cooperation 
with the States to make sure that the health and the safety of 
the American public is, in fact, being protected?
    Ms. Woodcock. Let me tell you about what actions we will be 
taking. We have acquired what's called a Web crawler which is a 
technology that will enable us to rapidly scan sites and locate 
sites that are illegally selling drugs. We are shifting more of 
our criminal investigators onto investigating these sites.
    Mr. Klink. How many more? Percentagewise, total number, how 
many people?
    Ms. Woodcock. We are doubling our resources from now on.
    Mr. Klink. From what to what?
    Ms. Woodcock. We estimate we have about 10 people right now 
working specifically on Internet full time.
    Mr. Klink. Full time, thank you.
    Ms. Woodcock. So we will double that to 20. We are working, 
as I said in my testimony, with the States attorney general, 
with the National Association of Boards of Pharmacy to get to 
your question of how do consumers know. It is not safe right 
now probably to purchase drugs from an on-line pharmacy that is 
not a well-established entity.
    Mr. Klink. So the FDA recommendation today to the general 
public through the media in this hearing and for anyone else is 
it is not safe today to be purchasing drugs from an on-line 
pharmacy unless you have information as to who is the 
controlling person, and whether they are licensed, and who they 
are licensed with so that there is, in fact, some verification 
of the legitimacy of that site?
    Ms. Woodcock. Yes, through a known entity and a known 
chain, or some other verification, you know who those people 
are, because otherwise it could be a foreign site. It could be 
anywhere, that's correct.
    Mr. Klink. How many of the 400 sites do we know about that 
are licensed, of the ones that we are expecting that are out 
there, that are of quality that are licensed? How many do we 
know that are legitimate, and what is being done about those 
that may not be?
    Ms. Woodcock. What's being done about legitimate sites, as 
you heard, there is a voluntary effort to have a certification 
program through the National Association of Boards of Pharmacy, 
the seal of approval that's been talked about, the VIPPS 
program. The other sites need to be investigated, and many of 
them are engaged in illegal activities, as other people have 
said, already other witnesses, and those activities need to be 
stopped. We have already taken cases and had convictions on 
Internet cases, but we need to step up this activity.
    Mr. Klink. Thank you.
    Mr. Upton. Mr. Bryant.
    Mr. Bryant. Thank you, Mr. Chairman, and I apologize for my 
absence. I am running between other subcommittee hearings, and 
health care is having a hearing on drug addiction and cocaine 
addiction, interestingly enough, not absolutely totally 
unrelated to what ultimately we could be talking about here 
with particularly young people who are venturing out who 
violate the law to obtain legal drugs and the possibility that 
could be a gateway ultimately to doing other things, to get 
illegal drugs and the accompanying addiction.
    Ms. Bernstein, I know that in August 1998, complaints were 
filed with your organization regarding the prescribing and 
selling over the Internet of Viagra, again without a 
prescription, and I know you may not be prepared today to tell 
me the status of those complaints, but I would like to know and 
I would like for the committee to know the status of those 
complaints. So if you could add to your testimony later with 
that information----
    Ms. Bernstein. I would be glad to do that.
    Mr. Bryant. [continuing] the status of those complaints.
    [The following was received for the record:]

                           Federal Trade Commission
                              Bureau of Consumer Protection
                                                 September 24, 1999
The Honorable Fred Upton
Chairman
Subcommittee on Oversight and Investigations
Committee on Commerce
House of Representatives
Washington, D.C. 20515
    Dear Mr. Chairman: This letter responds to the Subcommittee's 
request, made at the July 30, 1999 hearing on the Internet sale of 
prescription drugs, to provide details regarding complaints filed by 
Pfizer, Inc. (``Pfizer'') with the Federal Trade Commission (``FTC'') 
concerning the online sale of Viagra'.
    FTC staff first met with Pfizer representatives on August 25, 1998. 
Pfizer raised concerns about Internet sites distributing 
Viagra' without a prescription. Approximately one month 
later, Pfizer provided staff with specific information on six 
websites.\1\
---------------------------------------------------------------------------
    \1\ FTC staff also requested Pfizer to provide it with information 
concerning consumers who purchased Viagra' on the Internet 
who experienced adverse incidents. To date, Pfizer has not submitted 
any such information.
---------------------------------------------------------------------------
    Staff's review of Pfizer's submission revealed that each website 
offered Viagra' to a consumer without a pre-existing 
prescription. The consumer was invited, for a fee, to fill out an 
online questionnaire. All of the sites claimed that the completed 
questionnaire would be reviewed by a physician who would determine 
whether Viagra' was appropriate for the consumer. If 
approved, the consumer would be sent the prescription. None of the 
sites made any express or implied claims about the effectiveness or 
safety of Viagra'.
    Pfizer's principal concern with these websites appeared to be 
whether the actions of the physicians met the minimum criteria for 
prescribing Viagra', However, as we discussed in our July 
29, 1999 letter to Representatives Dingell and Klink, and in our 
testimony before the Subcommittee on July 30, 1999, the FTC has the 
authority to bring enforcement actions only where an online pharmacy 
engages in unfair or deceptive acts or practices in commerce.\2\ In 
contrast, the Commission has traditionally refrained from regulating 
practices that may fall within the doctor-patient relationship, such as 
communications between doctors and patients about course of treatment 
decisions. Moreover, the Commission does not have the authority to 
revoke an individual physician's license or to enforce state licensing 
requirements. The licensing, revocation of licenses, and regulation of 
pharmacies has traditionally taken place at the state level by state 
pharmacy boards. As a result, the FTC believes that the specific 
concern Pfizer raised is more appropriately addressed by other state 
and federal agencies with primary regulatory authority over the 
practice of medicine and distribution of prescription drugs.
---------------------------------------------------------------------------
    \2\ See 15 U.S.C. Sec. 41 et seq. as amended.
---------------------------------------------------------------------------
    Commission staff met with Pfizer representatives again on November 
2, 1998. The company reported that it had met with a number of state 
regulatory agencies who were concerned with the online prescribing of 
Viagra' without a prescription, and inquired about staff's 
interest in hearing from those agencies. FTC staff welcomed this 
contact, and later received letters from twelve states and the District 
of Columbia raising concerns about online prescribing practices and 
their ability to effectively regulate online prescribing and 
dispensing. Copies of those letters were provided to the Subcommittee 
as attachments to the Commission's July 29, 1999 letter to 
Representatives Dingell and Klink.
    Following the meetings with Pfizer, FTC staff has continued to 
identify and investigate online pharmacies. By using a variety of web 
search engines, reviewing Internet ``message boards,'' and traditional 
newspaper advertisements, staff identified approximately one hundred 
Internet pharmacies.\3\ Staff also made undercover buys from some of 
these pharmacies to determine if physicians were, in fact, involved in 
the transaction at the websites represented. While we are continuing to 
pursue some of these matters independently, staff has also referred 
matters to the relevant state and other federal authorities with the 
primary jurisdiction over the particular practices identified in the 
investigation.
---------------------------------------------------------------------------
    \3\ These websites were identified and reviewed prior to receipt of 
the ninety-four websites provided to the Commission by Representatives 
Dingell and Klink on June 29, 1999.
---------------------------------------------------------------------------
    Staff is working closely with other federal and state agencies, and 
other associations on issues relating to the sale of drugs over the 
Internet. We look forward to continuing to work with your staff on this 
difficult and serious public health issue.
    Thank you for this opportunity to provide additional clarification 
on this issue.
            Sincerely,
                                            Jodie Bernstein
                                                           Director

    Mr. Bryant. Dr. Woodcock, does your agency have 
jurisdiction over overseas companies that manufacture drugs or 
that counterfeit drugs and send them over to the United States?
    Ms. Woodcock. It is illegal to import drugs into the United 
States unless they are approved by the Food and Drug 
Administration, prescription drugs.
    Mr. Bryant. What authority do you have over that, and what 
can you do?
    Ms. Woodcock. Under the traditional pharmacy system, it was 
easier, as I have already pointed out, to manage and regulate 
the distribution of drugs, the coming into the United States. 
With the ability of consumers to reach out to foreign sites and 
order drugs that way, our authority starts at our border 
basically. We work with the foreign governments and the foreign 
authorities onsites that have been identified. We notify them, 
and we have gotten cooperation with them and with Internet 
providers to shut down ads for such sites that are illegally 
selling drugs.
    But as was already said, it's difficult for us to go 
overseas and actually do something about those sites. We can 
stop the drugs at the border, and we share that authority with 
Customs, with the DEA and other Federal agencies.
    Mr. Bryant. I assume your agency has counter or similar 
agencies, sister agencies so to speak, in other countries, and 
I assume your best efforts are being used to work with those 
agencies; is that right?
    Ms. Woodcock. Countries that have established drug 
regulatory systems are also struggling with the same issue that 
you are struggling with today.
    Mr. Bryant. Mr. Fong, from the Department of Justice, I 
compliment you on agreeing with me in many things in terms of--
and that is fairly often that I agree with the current 
Department of Justice, and sometimes we don't, but I know from 
your testimony basically you indicate that this is kind of an 
old problem repackaged, and can I take it by that statement 
that you feel that existing Federal law is sufficient to handle 
this problem?
    Mr. Fong. That is our current belief based on our analysis. 
We are actively studying the question, and we are meeting with 
our Federal agency partners and States, and to the extent we 
come to the view that additional assistance in the way of legal 
authority is necessary, we will come back to you, but at this 
point, as I indicated in my earlier remarks, existing law 
prohibits the dispensing of a prescription drug without a valid 
prescription from a licensed physician. We have prosecuted 
cases of violations of that statute. We will continue to do so.
    I want to add, if I might, in response to an earlier 
question from Mr. Klink about whom does the consumer go to, and 
this responds in part to your question as well. It depends in 
part on what the substance is. It's easy to miss the fact that 
some drugs are prescription drugs, which are governed by 
certain laws, and others are controlled substances, which are 
governed by different laws, and as you know, are required by 
the Drug Enforcement Agency. DEA has a very active 
investigation and enforcement effort in terms of controlled 
substances. So many of these problems that we are talking about 
that involve controlled substances, especially those from 
abroad, are being quite well, we believe, handled by existing 
DEA efforts.
    Mr. Klink. Would the gentleman yield for just one moment?
    Mr. Bryant. Mr. Chairman, are we going to have a second 
round? Okay. Could I have an additional minute based on the 
fact that he spent time answering Mr. Klink's question?
    Mr. Klink. I would ask unanimous consent for the gentleman 
to have an additional minute and a half, and I would ask if he 
would yield just briefly.
    Mr. Bryant. I would be happy to yield, if I am granted 
that.
    Mr. Klink. On that point about, you know, where does the 
public go to, and it depends on what it is, how would we expect 
the general public--and I read some of this. I used to be a 
professional reader. I used to be paid to read on the 
television. I was a news anchor. It is hard enough for me to 
read some of these words, yet alone to know what is over the 
counter, what is something that would have to have a 
prescription. How would the average person know that? Where do 
they go?
    You know, the point is, no prescription, no problem, you 
can get whatever you want. So what are you doing at DOJ? You 
have already acknowledged the fact that that is illegal. Give 
us an idea of what you are doing to bust those people that are 
breaking the law day in and day out. What percentage of the 
people are you arresting? What percentage of the people are you 
shutting down? How recently have you shut down the most recent 
of these couple of hundred sites that Mr. Stupak has in front 
of him? Have you visited them? Have you actually physically 
gone to any of those sites?
    I thank the gentleman for yielding.
    Mr. Fong. Well, you have asked a number of questions, and 
let me just say I was expressing a view as to the legal 
structure. I think it's a fair point you make that an average 
consumer probably would not know. On the other hand, the 
Internet does offer a wealth of information, and it would be 
possible, though not--I wouldn't expect that to happen--that 
there would be mechanisms for determining whom to go to. You 
know, there are many Internet resources in other--in the area 
of fraud that the FTC has jurisdiction over.
    Mr. Klink. Excuse me, if the gentleman will suspend, I 
don't want to take any more of the gentleman's time. When we 
get back to the second round, I will ask the same question, and 
this time I hope that you will answer.
    Mr. Upton. I was going to say the gentleman's 30 seconds 
has expired, and the remaining minute is back to Mr. Bryant.
    Mr. Bryant. Thank you, Mr. Chairman.
    Again, you indicate that it is already against the law to 
sell drugs illegally, but on the other side, the fraud side, I 
trust that the Federal laws out there, whether they be mail 
fraud or whatever, are sufficient, in your opinion, to cover 
the counterfeit, the people who set up phony Web sites and 
things like that. But it seems to me--I know you said you met, 
in your statement, with all the investigative agencies, the 
FBI, the DEA and your agencies on either side, and the U.S. 
Attorneys out in the field. The 93 U.S. Attorneys are the ones 
that I assume do a lot of this prosecution, but it seems to me 
it would also be a good idea to bring in the individual States, 
and as General Stovall indicated--from Kansas indicated, they 
are willing and prepared, as I assume most States are.
    Do you agree with her, is my question, that possibly we 
could enact some legislation that would be similar to what we 
did in telecommunications apparently to assist the cross-State, 
cross-boundary efforts of the States and get everybody working 
on this problem, not only Federal people, because I know they 
have got limited assets and they have certain criteria before 
they take cases, to give the States--empower the States with 
more authority to cross boundaries? Would you agree that some 
type of legislation, whether it be a uniform law or something, 
would be beneficial?
    Mr. Fong. We would certainly want to seriously consider 
that proposal, and I know we--to the extent we have experience 
with the telemarketing provision, we would look to that, but we 
are very open, I believe, to do those kinds of mechanisms; so, 
yes.
    Mr. Upton. Thank you.
    Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman.
    Having been in law enforcement for a number of years that I 
was, we know it is illegal to sell a controlled substance 
without a license. We know it is illegal to obtain a controlled 
substance without a prescription. We know it is illegal to use 
a controlled substance outside its prescribed use. So do you 
need a license to sell controlled substance on the Internet? 
You are shaking your head yes, Doctor, you do?
    Ms. Woodcock. As we already said, selling prescription 
drugs on the Internet without a prescription is illegal.
    Mr. Stupak. I asked, though, do you need a license to sell 
a controlled substance on the Internet? Pharmacy or medical 
license, do you need one to sell it on the Internet?
    Mr. Fong. Again, as I understand the question, it goes to a 
controlled substance rather than a prescription drug, and as I 
understand the law, all controlled substances must be, if they 
are dispensed or delivered--I am not positive because I haven't 
looked at the statute recently.
    Mr. Stupak. If it is controlled substance, is the person 
who is selling--the person who is selling must be licensed. The 
person who is receiving must have a prescription if it is 
controlled substance. We all agree with that, hey?
    Mr. Fong. Regardless of Internet, mail, telephone.
    Mr. Stupak. So then what are you doing to enforce it? That 
is what we are trying to ask you. January we had 26 sites. 
Today we got 400. You say the laws are there. Back when I was a 
police officer many moons ago, they were there. We enforced 
them. We have a new medium now called the Internet. What we 
want to know, what are you doing to enforce it? It is 
proliferating. You go from 26 in January to 400 in July. What 
are you doing to actually enforce it? Where is the cop on the 
beat, if you will? Where is the cop on the Internet to make 
sure this is being done and administered right?
    I mean, I am hearing promises, we are going to do some 
things, we are going to do something. Where you been? Do we 
have to put 100,000 cops on the Internet? Anyone care to 
answer?
    Ms. Woodcock. We have been working with the DEA as part of 
the interagency working group, so----
    Mr. Stupak. Specifically, I mean. I am working with this 
agency, I am working with that department, I am going to do 
this. What specifically are you doing to get at this?
    Ms. Woodcock. As I said, we have purchased a Web crawler. 
We are going to have surveillance over the Internet. We will be 
able to refer controlled substances illegally offered for sale 
to the appropriate enforcement people.
    Mr. Stupak. Do you have a task force or something that 
decided to do a Web crawler now?
    Ms. Woodcock. Yes. We have an Office of Criminal 
Investigation.
    Mr. Stupak. Office of Criminal Investigation. How often 
have they met about this Internet problem?
    Ms. Woodcock. The Interagency Task Force has met once, 
formally.
    Mr. Stupak. Was that after you got notice of this hearing 
or before you got notice of this hearing?
    Ms. Woodcock. I believe it was before.
    Mr. Stupak. Okay. So you have met once. From that, have you 
put any extra resources in trying to do something, or are you 
still trying to come up with a scheme? You see, while you are 
taking all this time to do something, next month there will be 
500 and then 600, then 700.
    Ms. Woodcock. As I said in my testimony, the FDA's doubling 
its resources devoted against this.
    Mr. Stupak. When?
    Ms. Woodcock. We are now. We have. We have a large number 
of cases in progress that we are investigating.
    Mr. Stupak. What does a case in progress mean, you looked 
at the site?
    Ms. Woodcock. More than that. They're being investigated.
    Mr. Stupak. What does that mean, investigated? What does 
the investigation consist of? Who, what, when, where, why and 
how?
    Ms. Woodcock. Yes. Basic police type of investigational 
activities, visiting the sites, obtaining evidence, purchasing 
and documenting an illegal sale by purchasing.
    Mr. Stupak. How many illegal sales have you purchased?
    Ms. Woodcock. I don't know the answer to that.
    Mr. Stupak. What else have you done?
    Ms. Woodcock. What else are we doing?
    Mr. Stupak. How many of these are licensed? We gave you 
104, you said earlier, and you checked into it, and how many 
are licensed by the States in those 104 sites?
    Ms. Woodcock. Again, I think Dr. Shuren said that we can't 
give you that answer right now. We don't know the answer to 
that.
    Mr. Stupak. I don't believe there is an investigation going 
on. I think we are looking at a lot of papers, and that is 
about it.
    Ms. Woodcock. We have taken quite a few actions. There have 
been convictions. People have been put in jail for Internet 
violations.
    Mr. Stupak. Since January on selling drugs over the 
Internet, people have been put in jail?
    Ms. Woodcock. I can't answer that specifically.
    Mr. Stupak. Well, that is what you just said, though, we 
are putting people in jail.
    Ms. Woodcock. We have done that. This has occurred.
    Mr. Stupak. For what?
    Ms. Woodcock. For example, there was a conviction in 
California, as we have in our testimony, for an individual who 
offered HIV test kits, a bogus HIV test kit over the Internet. 
That individual was convicted.
    Mr. Stupak. Is an HIV test kit a controlled substance found 
under the Controlled Substance Act?
    Ms. Woodcock. No.
    Mr. Stupak. No, it is not.
    Ms. Woodcock. That's correct.
    Mr. Stupak. You haven't done anything on this Internet 
problem. I mean, HIV test kits is not really the subject of 
this hearing. I mean, I think it is frustrating, having been in 
law enforcement, you see a problem that is growing leaps and 
bounds, you are talking about it, but nothing is really being 
done or were not prepared for the hearing, either one of the 
two.
    I yield back, Mr. Chairman.
    Mr. Upton. The gentleman's time has expired.
    Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman. I would like to 
follow up some of these questions because we have heard about 
now a prosecution of someone selling a bogus HIV test kit. We 
heard a little while ago about some people from South America 
selling an abortion self-sterilization kit. Neither of those 
are legal in the United States. And then we heard, Dr. 
Woodcock, from you about how importing drugs which are not 
approved in the United States is an illegal act, and here is 
what I am concerned about, and this is following up on the 
questions I asked Attorney General Stovall.
    I can understand what the States attorneys general are 
doing and what others are doing to enforce laws that relate to 
U.S.-based physicians, U.S.-based pharmacies who are dispensing 
drugs without a prescription, or overseas-based pharmacies and 
physicians who are trying to send in controlled substances or 
nonapproved drugs or kits, but it seems to me the real danger 
we have got lurking out there is overseas-based folks importing 
drugs that are not controlled substances, that are approved in 
the United States, but for which there is minimal, if any, 
pharmacy oversight and medical approval.
    First of all, are any of the cases that your agency or the 
Department of Justice, Mr. Fong, prosecuted involving cases 
like that, and what are you doing for that set of cases? You 
know, this is the guy from Denver, Colorado, who decides to 
order Viagra from a Mexican pharmacy and fills out the little 
questionnaire, and it is legal in the United States, it is an 
FDA-approved drug, it is not a controlled substance, but it is 
an overseas pro forma kind of thing.
    Ms. Woodcock. Would you like me to start? We have several 
cases where we have identified sites that were shipping drugs 
into the United States. We have alerted Customs, and some of 
the shipments have been detained. Sometimes they are United 
States importing agents that we are able to go after.
    Ms. DeGette. And how many times has this happened; do you 
know?
    Ms. Woodcock. There are specifics in my testimony. We can 
get back to you.
    Ms. DeGette. If you could supplement the record.
    [The following was received for the record:]

    The Federal Food, Drug, and Cosmetic (FD&C) Act directs FDA 
to refuse admission of any article that appears to be in 
violation of the Act and the Agency regularly intercepts such 
products from foreign sellers at the border through the 
detention process. Some of these detentions are based on Import 
Alerts, which identify problem commodities and/or shippers and 
provide guidance for import coverage. FDA has identified in our 
Import Alert system several providers of unapproved drugs that 
utilized the Internet.
    Since 1997, FDA has detained the following number of 
products which were offered for importation into the United 
States:

------------------------------------------------------------------------
                                                               Number of
                         Fiscal Year                          Detentions
------------------------------------------------------------------------
1997........................................................      29,420
1998........................................................      39,329
1999........................................................    *37,389
------------------------------------------------------------------------
*(through August, 1999)

    These figures are for all FDA-regulated products, including 
food, drugs, cosmetics, medical devices and other items, and 
includes entries offered by both commercial and personal 
importers. Thus, one detention could represent either one 
package or a shipment of multiple packages. An examination of 
FDA import data for the twelve months ending in July 1999 
indicates that 12.4 percent of detentions are of human drug 
products (5,067 drug detentions out of 40,855 total 
detentions). Finally, it should be noted that importations 
initiated through Internet web sites are not tracked as a 
separate category.
    In a number of cases handled by OCI foreign sellers and 
importing agents have been implicated. We are unable to 
determine the number of these cases because the database can 
not be queried in this manner. Two of these cases, however, are 
discussed in Dr. Woodcock's written testimony submitted for the 
July 30 hearing. Additionally, CDER has issued ten Warning 
Letters to firms in foreign countries concerning violative 
products that were offered or promoted over the Internet.

    Ms. DeGette. And are those FDA-approved-type drugs or not?
    Ms. Woodcock. Generally, I think we have been targeting our 
efforts by risk.
    Ms. DeGette. What kind of drugs are they? Are they 
generally controlled substances or not?
    Ms. Woodcock. They have generally been unapproved drugs of 
different kinds, steroids, other kind of unapproved drugs.
    Ms. DeGette. What about for the approved drugs, that the 
was the question I had asked.
    Ms. Woodcock. Yes. We can also do that.
    Ms. DeGette. Have you done that?
    Ms. Woodcock. I would have to get back to you.
    Ms. DeGette. Thank you. If you can supplement your 
testimony, I would appreciate it.
    [The following was received for the record:]

    When FDA approves a drug or biologic product for marketing, 
it is not only approving the formulation of the drug product 
and its labeling, but also the manufacturing facility that will 
produce the product. Most FDA-approved drugs are manufactured 
in the United States, but some are manufactured in foreign 
countries. Thus, the drugs manufactured by foreign companies 
pursuant to an FDA-approved new drug application (NDA) and 
shipped into the United States through recognized distribution 
channels are just as legitimate as FDA-approved drugs 
manufactured in this country.
    A problem arises, however, when consumers import drugs 
purchased overseas, either through the mail or by personally 
carrying the drugs across a United States border. Although it 
is possible that such a drug is FDA-approved (manufactured in 
an FDA-approved facility pursuant to an approved NDA) this is 
rarely the case with drugs purchased overseas. Most drugs 
purchased in foreign countries are not FDA-approved, and as 
such, are subject to seizure under the FD&C Act.

    Ms. DeGette. Are you aware of any, Mr. Fong?
    Mr. Fong. I am not aware of any. As you know, however, 
given the questions you've asked, this is a very difficult 
area. It involves a huge amount of international cooperation.
    Ms. DeGette. Here's the thing we are all really worried 
about. Mr. Stupak has that big stack of sites that have 
proliferated just this year, and I know it is very difficult 
from your perspective, but this is why we are all so worried. 
My worry is not just with the nonapproved abortion kits and the 
AIDS test kits that don't work. I am worried about other drugs 
that may not seem so risky, but if your doctor doesn't 
prescribe it and you have got a heart condition, you are going 
to keel over and die if you use it.
    Ms. Woodcock. Prescription drugs are prescription for a 
reason. That's because----
    Ms. DeGette. That is exactly right.
    Ms. Woodcock. [continuing] they ordinarily would not be 
safe in the hand of a consumer even if they were able to self-
diagnose the condition. They may still pose considerable risks.
    Ms. DeGette. I understand all of that. So, Mr. Chairman, 
may I have unanimous consent for just another 2 minutes because 
I have to leave?
    Mr. Upton. Go ahead.
    Ms. DeGette. Thank you.
    I have got a chart up there, and this is along these same 
lines. I know you can really read it about as clearly as I can, 
but what it says in part is from First Pharmacy On-line, and it 
says, quote, I understand that the information that I am 
providing will be transmitted to a physician licensed to 
practice medicine in Mexico. I understand the Mexican physician 
is not licensed to practice medicine in my State, and I 
acknowledge and agree that the Mexican physician is not 
practicing medicine in my State, and then it says the Xenical I 
will receive is real and will be sent to me by a pharmacy in 
Florida which has been in business since 1946. I understand 
that my credit card will be processed by M.D. By phone.
    Now, I guess my question for Mr. Fong and Dr. Woodcock is, 
number 1, do you know about this site? Number 2, is it legal? 
And number 3, have you inquired into this site, and what are 
you doing about the situation?
    Why don't we start with Mr. Fong.
    Mr. Fong. I am not personally aware of that site.
    Ms. DeGette. That is one of the ones we gave you according 
to staff.
    Mr. Fong. And I would have to study it to see, to form a 
legal opinion about it. This is the kind of thing that we have 
been discussing amongst ourselves. I know you want us to take 
action, and we do take this problem very seriously, but we are 
also concerned about rushing in and doing something with 
unintended consequences. I don't--I don't mean to minimize at 
all the fact that we need to do more, but I also think we need 
to be thoughtful and considerate about what we do, and that's 
why I want to study it.
    Ms. DeGette. If you can get back to us and supplement your 
responses on this particular issue, I'd appreciate it.
    [The following was received for the record:]

    FDA is evaluating the First Pharmacy Online site as part of 
its ongoing efforts to regulate the sale of prescription drugs 
over the Internet.

    Ms. DeGette. Do you have anything to add?
    Ms. Woodcock. The activities you've described I would think 
would be illegal, and we can take action against this. I am 
sure that if you have given us this site, this is one we're 
looking into.
    Ms. DeGette. Okay. If you can follow up and let me know for 
certain.
    Do you have any final comment, Ms. Berstein?
    Ms. Bernstein. On this subject?
    Ms. DeGette. Yes.
    Ms. Bernstein. Only this, that I thought that that site was 
an attempt by a company apparently to get a consumer to agree 
to violate the law basically, and I think it's our position 
that a consumer or any other person can't waive State law. So I 
think it would be an illegal site.
    Mr. Klink. Would the gentlelady yield for one moment?
    Ms. DeGette. I would be happy to.
    Mr. Klink. Mr. Fong, with all due respect about your 
rushing in answer, the fact is that you should know, coming 
from DOJ, you can't waive State law. This is as close to a 
signed confession as anything I have ever seen. I don't 
understand where you are rushing in. They are saying that the 
doctor is not licensed in your State. Everything that you told 
us in your statement about controlled substances they are 
admitting to. This is a signed confession. Why would DOJ be 
rushing in?
    Mr. Fong. I meant the comment to apply generally rather 
than as to this specific site.
    Mr. Klink. What can you do about this site? You are aware 
of it now. How long will it take you to take some action on it?
    Mr. Fong. I can find out whether or not we can investigate, 
and if so, we will do so.
    Mr. Klink. How would you determine whether you can 
investigate or not? Is it a jurisdictional question, or is it a 
question of whether the law has been broken; whether, in fact, 
a doctor not licensed to practice in the United States can 
prescribe drugs in the United States? Is that the question, or 
is the question whether or not you have jurisdiction?
    Mr. Fong. I would say that I think it's a matter of--I 
don't think it's a matter of jurisdiction per se, so I do think 
once we concluded that it was a potential violation, we would 
investigate.
    Mr. Klink. Potential violation. I yield back. I thank the 
lady.
    Ms. DeGette. Thank you, and I yield back to, Mr. Chairman.
    Mr. Upton. Thank you. Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I, like my colleagues, 
have to admit I didn't bother to look at any of these things 
until our committee hearing today. I have concerns not only of 
state law but, for example, prescriptions now where you can--
the question is what is currently bothering you now, and I 
guess you fill it in, and what currently is bothering you about 
your health, is your body mass index above 25, and you agree to 
sign the waiver for Phentermine.
    I guess I am so surprised to see this, and one of the 
things I am concerned about is this committee and the full 
committee and two of our subcommittees are going to deal with 
hopefully telemedicine, which is, again, a growth industry, and 
we have a little problem with telemedicine working across State 
lines, so we will have to deal with that.
    But what I am worried about is companies like this, or 
physicians, no matter where they are at, are really going to 
hinder us trying to use the Internet and use the technology 
that we are doing safely. And with what we have, and the 
numbers we have seen that my colleague passed--although I have 
to admit they are very good entrepreneurs, because safe Web 
medical advertised Viagra, along with a Bahamas cruise for 
$113.
    I guess I am surprised that--is there cooperation? I know 
we had the Attorney General from Kansas, but is the DOJ working 
with our local State Attorneys General who are aggressively 
pursuing this? Not only DOJ, but FTC and also the FDA?
    Mr. Fong. I understand that representatives of the 
Department have met with the National Association of Attorneys 
General on this issue.
    Mr. Green. Again, my concern is that we have--you can save 
on your prescriptions if you order them by mail. We have that 
now. Of course, you have to have a doctor's prescription.
    In the next step, it is ordering by Internet, and we are 
seeing a lot of bad actors who may limit that for the people 
who really have a prescription, instead of being self-diagnosed 
by the Web. It worries me we are going to limit--we are going 
to have to do it by statute, maybe, limiting it; and that way 
we will lose some of the benefits of what is happening with the 
revolution in telecommunications.
    That is why I guess not only the agencies each of you 
represent, but the States, need to be as aggressive as they can 
to prosecute some of these folks who are violating not only 
State law, but I know Federal law also.
    I guess one of the things when I was in the legislature in 
Texas we passed, and most States did at the urging of the 
Federal Government, triplicate prescriptions. How would that 
possibly be effective doing Internet--having prescriptions on 
the Internet? Can either of you answer that? Comply with any of 
the prescription laws that we have concerning controlled 
substances?
    Ms. Woodcock. Could you restate your question?
    Mr. Green. Triplicate prescriptions. If I have some type of 
controlled substance, the doctors--doctors always used to 
complain about it. How can we possibly ever have any kind of 
compliance with that law?
    Ms. Woodcock. Obviously, I would think that for safe 
Internet prescribing, there may need to be new technologies for 
things like that, electronic signatures and so forth that were 
alluded to earlier. There has to be verification. This new 
field, cybercommerce, is really raising some new challenges.
    Mr. Green. Okay. I know, Ms. Bernstein, I understand that 
Pfizer has contacted several States and asked the States to 
contact the FTC to take action against certain of these sites 
selling Viagra; is that true?
    Ms. Bernstein. We have been in touch with Pfizer, yes.
    Mr. Green. Was it initiated by Pfizer?
    Ms. Bernstein. Yes, it was.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Upton. You know, I have heard a lot of things here this 
morning, and I think a number of us have, have certainly a good 
number of frustrations. Dr. Woodcock, when we hear you say that 
you would not advise--when we hear the FDA in essence say we 
would not advise anyone to use an on-line pharmacy without some 
personal knowledge of the site, I started looking through a 
couple of the 100 sites that Mr. Stupak--200 sites that Mr. 
Stupak offered. I daresay I haven't heard of a single one of 
them. They have Dr. Welby-like--I know he retired a long time 
ago, he may be deceased--but when I see pictures of folks that 
look a lot like he used to, and different businesses on here in 
terms of looking like they have a real clinic.
    I come from a small town, and when my folks and I needed 
pharmaceutical drugs, we went to a place called Gillespie's. 
Dr. Gillespie, it was a family held business, and his brother 
got into it as well, and there are two little shops that are 
still in business today. People know of the quality of care 
that you got when you went to Gillespie's, just like you knew 
your own physician.
    And nobody knows, I can't believe anyone on this panel 
would know or recognize maybe any of these places. You would 
have no personal knowledge of any of them, probably don't even 
know a neighbor or friend that might use them. Yet you say that 
no one should be using these things without some personal 
knowledge. There is no Good Housekeeping Seal of Approval. 
There is no way that people can know.
    When you hear Mr. Fong testify they stand ready to 
prosecute, and yet there is really not a single case, other 
than maybe an AIDS test kit out there, and his statement, too, 
that they don't want to rush in, yet in fact we hear--one of 
the bills that this panel began to work on the last couple 
months, date rape drugs. One of the things that alarmed all of 
us is their availability over the Internet still today. We were 
able to pass legislation out of our Health Subcommittee last 
week, and it looks like--actually it was this week, and it 
looks like we are going to have a full committee markup on it 
next week and on the House floor soon. Everyone is on board. It 
is bipartisan, as it should be, and we are moving forward 
because we recognized the problem.
    Yet we hear the Department of Justice doesn't want to rush 
in, yet in essence you are not giving the seal of approval to 
any of these, and it is literally impossible for an individual, 
a consumer, to have some knowledge of this, so there really is 
a gigantic problem.
    As we heard from, I believe it was the Attorney General 
from Kansas, testify a little bit earlier, and particularly the 
reporters, no one seems to be in charge. The reporter from 
Philadelphia indicated that they in fact had gone to Federal 
officials, the DEA, and they said that they would look into it. 
But nothing has happened.
    These are not isolated cases. I have got to believe in 
every single community we can find abuse. Where are we to turn?
    Ms. Woodcock. With regard to purchasing drugs over the 
Internet, I think consumers can go to their pharmacists and get 
a recommendation for a reputable chain, their physician, their 
health care provider, their health care insurance company. But 
consumers should not be purchasing prescription drugs over the 
Internet from unknown sources, or without a prescription and 
without having seen and having visited their health care 
provider.
    Mr. Upton. But it is happening, big time.
    Ms. Woodcock. Okay. The Agency has taken numerous complaint 
actions on the Internet. I don't want to give the impression 
that we haven't. We have had over 60 cases that we have taken 
on suspected illegal Internet sales, including the first case 
that we took in 1994.
    Mr. Upton. Is that 60 cases in 5 years? One a month? 12?
    Ms. Woodcock. I have to stress that our resources are 
stretched. As Congressman Stupak indicated earlier, we have the 
Prescription Drug Marketing Act, we have numerous oversight of 
numerous types of illegal sales, many of which have gone on in 
non-Internet contexts. What we are going to do is shift 
resources from our surveillance in that area into the Internet 
because of the rapid growth in this area.
    Mr. Upton. Mr. Klink.
    Mr. Klink. If I could just ask a basic question, Dr. 
Woodcock. We are talking about of--what, the actions that you 
have taken against those people who are distributing over the 
Internet of what drugs?
    Ms. Woodcock. I would have to get back to you.
    Mr. Klink. The 60 cases also you are talking about. Those 
60 cases, tell us later.
    Ms. Woodcock. I will.
    [The following was received for the record:]

    At this time, OCI has 55 ongoing criminal investigations 
involving on-line promotion and sales of FDA-regulated 
products. The 60 cases referred to in FDA's written testimony 
included some non-criminal investigations.
    The criminal investigations include six investigations 
involving sales on the Internet of 17 specific prescription 
pharmaceutical products, including several which are controlled 
substances under the Controlled Substances Act. Potential 
charges include the sale of prescription drugs without a 
prescription, illegal importation of unapproved new drugs, 
illegal sale of controlled substances, and wire and mail fraud. 
All of the six cases were opened in 1998 and 1999. These six 
cases do not involve the operation of what would be normally 
recognized as legitimate pharmacies in this country, although 
they may appear to be pharmacies to the unwary consumer.
    The remaining 49 open cases do not involve the sale of 
approved prescription drugs, but the promotion and sale of a 
variety of other products falling under FDA's regulatory 
authority. It is important to stress that in FDA's view, these 
sales may pose equally significant and, in some cases, possibly 
greater risk to the public health than the cases described 
above. We believe the devotion of our limited resources to 
these cases is essential to protecting the public health.
    More than a third of the 49 cases involve the apparent 
illegal sale of gamma hydroxybutyrate (GHB) or its relative, 
gamma butyrolactone (GBL), both extremely potent unapproved 
drugs. These drugs are often used ``recreationally'' but also 
have been used in ``date rapes.'' The use of these drugs has 
resulted in severe respiratory problems, seizures, coma and 
death. As you know, GHB is currently not scheduled under the 
Controlled Substances Act, but is the subject of both 
administrative and legislative activity to accomplish such 
scheduling.
    Other open Internet-related criminal investigations involve 
the sale of human growth hormone; HIV test kits; adulterated 
medical-products; fraudulent medical devices; fraudulent 
unapproved drugs, immune system ``boosters,'' HIV or AIDs 
``cures,'' tampered products; and diverted or misbranded drugs. 
These cases date from 1997 through the present.
    FDA has a total of 12 closed criminal cases that involved 
the sale of drugs in which the Internet played a role. Four of 
the 12 cases involved resulted in five arrests. Two of these 
cases were described in FDA's written testimony. The following 
provides more detail concerning two additional cases.
    1. In the first case, a state prosecutor contacted OCI 
concerning a request for assistance from a therapist concerned 
about the health of a 16-year-old boy. Through an Internet chat 
room dealing with transgender issues, the boy had been in touch 
with an adult male subject in Arizona who was encouraging the 
adolescent to get a sex change operation and supplying the boy 
with prescription drugs normally prescribed for presex change 
patients. To further this objective, the subject had been 
selling the juvenile Premarin and Progesterone (female 
hormones) and Aldactone (an androgen suppressant).
    OCI contacted the FBI ``Innocent Images Squad'' to 
determine whether the man was involved in approaching other 
children. Later the boy's mother contacted OCI and advised that 
her son had gone through extreme mood swings and consequently 
she had searched his room. She found more of the sex change 
pills and a map showing the way to the subject's home in 
Arizona. OCI and FBI interviewed the 16-year-old juvenile in 
his parent's presence. The boy admitted his ongoing 
relationship with the subject and agreed to cooperate in the 
investigation. He provided e-mail messages from the subject 
that clearly confirmed his parent's fears and suspicions. The 
boy's parents provided the latest shipment of drugs to OCI for 
testing.
    A search warrant was served at the subject's residence in 
Phoenix, Arizona resulting in the seizure of drugs and 
documents related to this investigation. The subject admitted 
going to Mexico to obtain the drugs, repackaging them and 
sending them to the juvenile across State lines. A Federal 
grand jury indicted the subject for 12 felony counts concerning 
misbranded drugs. The subject pled guilty to two counts of 
delivering misbranded drugs in interstate commerce and was 
sentenced to six months home confinement, two years probation 
and $18,000 restitution to the boy's family for therapy costs.
    2. In the second case, OCI received information from local 
police in Texas regarding the sale of GHB kits over the 
Internet to a juvenile. Investigation determined that 
unapproved drugs were being mailed from a location in Florida. 
OCI, working with state authorities, obtained a search warrant 
for a warehouse in Winter Park and Oviedo, Florida. Evidence 
was recovered at both locations and a consensual search was 
conducted at a third location where large quantities of GBL and 
sodium hydroxide were seized.
    State of Florida authorities and OCI arrested two subjects 
for violations of State controlled substance acts. Later, one 
defendant died of undisclosed causes and the second defendant 
was placed on pretrial diversion to include supervised 
probation for a period not to exceed nine months.
    As the Internet assessment team continues its review of web 
sites, it is anticipated that the reviews and assessments will 
be converted to more formal investigations.

    Mr. Klink. I don't expect you to have that in front of you, 
but we really need to have that information. I would also like 
to know those 60 cases, over what period of time, so that we 
know from the time that we have been--you know, the Internet is 
much more explosive today than it was yesterday. It much more 
explosive this month than it was last month; this year than it 
was last year.
    So as the Internet has gotten more active, as Mr. Stupak 
pointed out--we have gone from 26 of these sites in January to 
as many as 400 now--we want to see if your activities have 
similarly intensified during that period of time.
    Mr. Fong, what is the difference, the basic difference, 
from a law enforcement standpoint, of a person going out on the 
street with Valium, Percocet, any other kind of drugs that 
would have a street value, and there are others that we would 
know about, and selling them on a street corner, on a 
playground, in an alleyway? Obviously that person is not 
licensed, he is a common drug dealer. There is a market in 
those drugs, and always has been.
    I remember as a news reporter going out with law 
enforcement personnel on drug raids all the time. It wasn't 
always crack cocaine or heroin, a lot of times it was 
controlled substances. What is the difference between that and 
what is taking place on the Internet right now, while we speak 
from a law enforcement standpoint?
    Mr. Fong. Legally, there is very little difference.
    Mr. Klink. If there is little difference, what is it, other 
than volume of business because you have a bigger audience?
    Mr. Fong. The difference is investigatory. These sites are 
difficult to investigate because they can come up and they 
disappear. Our agents need to be trained to preserve the Web 
sites for use as evidence in court.
    Mr. Klink. If I can just stop you for a second, because I 
want to walk through this with you. What is being done, then, 
to do that and under what kind of timeframe? Because we are not 
seeing a whole lot of--I am disturbed by Dr. Woodcock's 
comments that there is an interagency task force that met once. 
What happened at that meeting, if any of you can tell us? 
Apparently you didn't even agree to meet again.
    Mr. Fong. One of the meetings was, I believe, scheduled for 
today.
    Mr. Klink. That was coincidental. We would have invited the 
entire agency task force here, and we could--what is this task 
force doing? If you have only met once during all of these 
months, how can there be any coordination with just one 
meeting? What kind of timeframe? Let's just start with DOJ.
    Mr. Fong. If I could respond first to the earlier question, 
we have an ongoing effort to train our agents and our 
prosecutors. This is a priority of the Department. We all know 
that computer crime, the hacking cases, present very difficult 
challenges, and we are responding to them. This is no 
different.
    As was said earlier, we are trying to keep up with the 
truly bad actors, and we are doing our best and we can do more.
    Mr. Klink. What kind of dedication of resources do you 
have? Do you have any idea of the number? If you don't have the 
number now, you can get it to us later. Any idea of the number 
of agents within the Department of Justice that are working on 
this and the number you would expect within a month or year 
from now? If you can give us those kind of details so we know 
the kind of resources the DOJ is really putting into the 
problem.
    Mr. Fong. I can give you a general sense. We have a 
computer crime section within the criminal division. The fraud 
section has people working on this. The civil division, the 
Office of Consumer Litigation has responsibility for consumer 
protection laws. Each U.S. Attorney office has somebody 
designated as a computer-trained person, and there are often 
more than one. The FBI has individuals who are trained. It is 
such a high-growth area that we recognize the need to dedicate 
resources to this area.
    Mr. Klink. The pharmaceutical manufacturers seem to be 
fairly responsible people. I would ask the Department of 
Justice, FTC as well as the FDA, do you think we could just let 
them go ahead and self-regulate? Why would we want to inspect 
them? Why don't we just let them self-regulate themselves, as 
we are these sites? That has been the suggestion. We kind of 
don't interfere with e-commerce. Let's let them self-regulate. 
Is there any kind of a problem? Carry it on----
    Mr. Fong. Of course, going back to first principles, we 
have criminal laws because we don't expect or trust individuals 
to self-regulate. That is the intersection of two sets of 
policies that we are currently grappling with.
    Mr. Klink. What is the difference between us regulating how 
these drugs are manufactured, how they are developed, how safe 
they are, and then not regulating how they are being dispensed? 
We don't know when those drugs are shipped, where they were 
manufactured, where were they manufactured in the case of 
Viagra. Was it made by Pfizer or is it a knock-off drug? What 
was the care and custody?
    We saw a news report this morning they were repackaged to 
avoid Customs. During that time were the drugs tainted? How 
were they handled?
    There is no protection. Is FDA doing anything to assure us 
of this safety? Is the Department of Justice doing anything to 
prosecute, to see that in fact when these laws are broken, that 
someone is going to be prosecuted? And in how many cases? We 
don't have answers. Unfortunately, we have too little time. But 
we don't have answers to any of these questions. I would say it 
is unfortunate, Mr. Chairman, and I know we are going to 
continue to work on this. We have barely scratched the surface 
on this. We have more questions coming out of today's hearing 
than we have answers. If you have a response?
    Ms. Woodcock. We agree it is illegal to perform many of 
these sales on the Internet. We are trying to get control over 
this activity. We do not feel that illegal activity should be 
self-regulated.
    Ms. Bernstein. The FTC believes in self-regulation, but not 
in the face of where laws are being broken. Self-regulation 
does play a role if there is a basic law in place. That is our 
view. And it can be effective in carrying out more kinds of 
controls that you would not want to be in Federal law.
    But in this instance, as I said before, we really believe 
that legislation that would mandate identifying information 
would be very helpful to law enforcement generally, both to the 
States and the Federal Government.
    Mr. Klink. Mr. Chairman, the question I have here is we 
have three agencies in front of us. The FTC came in in their 
prepared testimony--first of all, they responded in a fairly 
timely fashion to all questions we asked them, and we 
appreciate that. The other thing is they walk in saying, Look, 
basically we need to know who is operating the site, who 
licenses them, where they are located, and we think there ought 
to be a law to do that.
    Yet the Department of Justice hasn't done that. In fact you 
started off your testimony saying you are not here to suggest 
any laws. We haven't heard anything from the FDA. The most 
commonsense step is to at least let us know who is doing it, 
who is licensing, who is accountable; and yet the Department of 
Justice and the FDA to this point in the hearing has not 
stepped up to the bath, saying we are in favor of taking that 
preliminary step to assure the public there is some level of 
safety.
    Mr. Fong. May I respond? I will go back to something I said 
at the very beginning, which is that the same laws that apply 
in the physical world ought to apply to on-line conduct. If 
disclosure is required in the off-line world, to the extent 
State boards require the posting of a license, which States do, 
that should also apply on the Internet. There should be no 
distinction, in other words, and the same laws should apply.
    Mr. Klink. Then we should have 50 different State laws to 
apply? Because that is what it is now. Each State has their own 
law. You are saying now for these sites, which as the Chairman 
pointed out--and I thought he did a wonderful job doing it--the 
pharmaceutical company is headquartered there, the 
manufacturing plant is there. We are sending the order to 
Mexico, to a doctor to who may or may not be a doctor. They are 
shipping the drug from a drop box in Florida. Where do we 
license it? Do we go with each State having their own set of 
regulations; or do you recommend from the Department of Justice 
that, if it would be easier, for law enforcement at the Federal 
and State level to work together if we had some uniform law 
that determined how we deal with this display of licensing and 
the information that went out to the public at these sites?
    Mr. Fong. As Attorney General Stovall testified earlier, we 
have to be very careful not to Federalize what has 
traditionally been a State responsibility: regulating 
pharmacies and doctors. We do want to work together in 
partnership, but we also want to respect our traditional 
jurisdictions. We enforce Federal law, they enforce those State 
provisions. We think we can do it together.
    Mr. Klink. In all due respect, and I think we are getting 
to the point here, no one suggested Federalizing. But I would 
like you to explain to me what jurisdiction, what amount of 
manpower any of our States or Commonwealths would have to be 
able to track down a site in New Zealand, in Singapore, in 
Mexico, in South America, in Central America, in another State? 
What enforcement authority would they have to be able to do 
that? If they are not working with the Department of Justice to 
have a uniform standard of some kind, is there any evidence 
that the Department of Justice has been working with the 
various attorneys general to formulate some method of attacking 
this problem? Has that begun to occur as we sit here today?
    Mr. Fong. We have begun to have some conversations with 
them.
    Mr. Klink. How far along is the process?
    Mr. Fong. I can say I know of meetings that have been held, 
but I don't know----
    Mr. Klink. Any suggested action from those meetings?
    Mr. Fong. I assume we are working together to develop 
strategies, enforcement strategies.
    Mr. Klink. I would prefer that we don't assume, Mr. Fong. I 
will ask you to get back to this subcommittee with specifics. I 
don't want to hear you have had meetings. I have had a lot of 
meetings, sit down and have a cup of coffee and donuts. That is 
as specific as it gets. I want to know specifically what has 
come out of the meetings. Have there been suggested actions? Is 
the Department of Justice ready to step in and help the States 
beyond their borders where they don't have jurisdiction? I 
appreciate your telling us the meetings are occurring.
    But this subcommittee wants to know specifically what you 
have done, because what you are doing for the public has been 
put at risk. We have not in a timely fashion had the questions 
that we have asked be responded to, and we are tired in this 
subcommittee of hearing that you are just having meetings and 
that you have these interagency task forces that have met once.
    I want to know specifically what has been done. We will 
have a list of questions for you, some of them which I have 
asked here today, but counsel will get them to you, and we 
would like to have them responded to.
    Mr. Chairman, I thank you for your indulgence, but again, 
and I hope you will agree, we are going to have to have follow-
up hearings to this.
    Mr. Upton. Mr. Bryant, do you have additional questions?
    Mr. Bryant. Mr. Chairman, I do have just a couple of quick 
comments. I know we have got a vote on right now. I think our 
panel has received somewhat of a message today that we are very 
concerned about what is going on, and obviously you are too, 
and we have just got to get everybody working forward and 
working together on this.
    Certainly I have heard the resources. That is something we 
hear very frequently on the Hill: Our resources are stressed. 
Having served as a United States Attorney at one time and 
having 29 lawyers working for me, and we were prosecuting white 
collar crime, bank robberies, lots of drug cases and all kinds 
of Federal issues, I know resources are stretched. That is why 
I think we have to--you have to take out of this meeting that 
this has to be a priority, has to go up there, and you have to 
get the U.S. Attorneys out there, assigning their assistant 
U.S. Attorneys, making sure their investigative agencies go out 
there and find these types of cases. Certainly at main Justice, 
we have to see those international problems worked on. We 
certainly want to cooperate as much as we can.
    I don't want to, again, overlook the fact that we have a 
great number of State--not only State attorneys general, but 
State investigative agencies that can be used as much as we did 
in, I believe, the telemarketing law. Again, if we have to as a 
Congress work together to pass legislation, then we need to 
know that, and how to best do that.
    I want to stress in closing that we have talked about the 
bad situations, and there is tremendous potential here for bad. 
But, on the other hand, there is tremendous potential for good. 
I think from our first panel, we see those that brought a good 
case for the ability to sell legally, in a legal process, drugs 
over the Internet, and I think that can work. I think it can 
work, and I think it is part of our jobs to make sure we ferret 
out the bad so that the good can survive.
    I want to hear from the next panel of experts, the people, 
the good guys out there doing it. I believe there are two 
companies here that will be represented on the panel that are 
doing it right. We have got the AMA, we have the Texas Health 
Department representative, and we have the pharmacy people 
here. So we need their suggestions. So if I will quit talking 
long enough, perhaps we will get to that panel after we come 
back from voting. So I will yield back my time.
    Mr. Upton. I would note that was the warning bells for 
going back into session. The vote has not yet been ordered. Mr. 
Stupak?
    Mr. Stupak. If I may, Mr. Chairman. Mr. Fong, if the same 
laws apply, then why does it take time--and I have heard take 
time, analyze, study, train, computer section, fraud section, 
computer section, U.S. Attorneys, FBI--if this is the same laws 
that apply whether you are selling on the Internet or selling 
on the street, why do we have to go through all of that?
    I mean, I fail to see the difficulty here in doing an 
investigation. Take the one we have been talking about here. 
First, Pharmacy On-line. Here is what it says again: I 
understand that the information I am providing will be 
transmitted to a physician licensed to practice medicine in 
Mexico. I understand that the Mexican physician is not licensed 
to practice medicine in my State, and I acknowledge and agree 
that the Mexican physician is not practicing medicine in my 
State. It goes on to say, that Xenical will receive its seal 
and will be sent to me by a pharmacy in Florida which has been 
in business since 1946. I understand that my credit card will 
be processed by M.D. By phone.
    So, do we have a reciprocity agreement with Mexico that if 
you are a licensed physician in Mexico you can practice in the 
United States?
    Mr. Fong. I don't know the answer to that; I am sorry.
    Mr. Stupak. Let me help you. The answer is no. Second, is 
Xenical a controlled substance? The answer is yes.
    The third question: Is it a violation of the law for a 
Mexican doctor to prescribe controlled substances to a U.S. 
citizen?
    Ms. Woodcock. It is a violation of U.S. law for the drug to 
be brought into the country.
    Mr. Stupak. My question is: Is it a violation of law for a 
Mexican doctor to prescribe a controlled substance to a U.S. 
Citizen? Remember, Xenical: Prescription drug, controlled 
substance.
    Ms. Woodcock. Is it a DEA-type of controlled substance? It 
is a prescription drug.
    Mr. Stupak. Right.
    Ms. Woodcock. Right.
    Mr. Stupak. Same question.
    Ms. Woodcock. Of U.S. Law, to bring that into this country.
    Mr. Stupak. No. Can a Mexican doctor prescribe a 
prescriptive drug to a U.S. citizen? Yes or no? I am right here 
in Washington DC, a Mexican doctor prescribes a substance for 
me, prescription drugs. He is in Mexico. Is it legal?
    Ms. Woodcock. No, he continues to send it to you.
    Mr. Stupak. Violation of law, isn't it?
    Ms. Woodcock. That is correct.
    Mr. Stupak. Is it a violation of law for a Mexican doctor 
to have a prescription filled by a pharmacy in Florida?
    Ms. Woodcock. Yes.
    Mr. Stupak. Violation number 2. Is it a violation of the 
law to have a Mexican doctor, not licensed to practice in 
Florida or Michigan, prescribe a controlled substance or a 
prescription for someone in Michigan? I think we already 
understand it is; right?
    Ms. Woodcock. Yes.
    Mr. Stupak. When I use the mail, the telephone, or the fax 
machine to receive or send this prescription without a license, 
that is also against the law, isn't it?
    Ms. Woodcock. Yes, okay.
    Mr. Stupak. Sure it is.
    Ms. Woodcock. I am not a lawyer, sir.
    Mr. Stupak. I haven't done police work in 12 years, but I 
just found 4 violations there. Now, why do we have to study, 
analyze, train, do all this stuff? Why don't you just set up a 
sting operation like the TV people did, don't use a cat or dog 
because they can't testify in court, but use someone real. Use 
yourself. You got 400 sites. You have 9,000 people. Go to the 
Web sites, run them through here, and you are going to get your 
violations.
    Ms. Woodcock. We have been doing that. We have been doing 
investigations, setting up sting operations. These cases are in 
progress. It is not all of them, but we have been doing that.
    Mr. Stupak. How many buys do you have? How many times have 
you bought on the Internet?
    Ms. Woodcock. I can get back to you with that information, 
I think. We don't have it with us.
    Mr. Stupak. How about a guesstimation? Is it like your task 
force, one meeting?
    Ms. Woodcock. We will get back to you. It is more than one.
    [The following was received for the record:]

    In regard to the six open prescription drug cases 
referenced in response to question three above, 12 undercover 
buys have been made in these cases. With regard to the other 
cases, we have not tabulated the buys because these cases are 
not directly related to the topic at hand (internet pharmacy 
practice). In any case involving sale of an illegal product, 
undercover buys are a routine practice, and cases in which the 
Internet plays a role are not an exception. Initiation of such 
a case typically involves one to three undercover buys to 
establish a violation prior to execution of search/arrest 
warrants or other judicially authorized investigative action.

    Mr. Stupak. I mean, again, we start off here in January 
with 26 sites, we are up to 400. You don't have to be a rocket 
scientist to figure out how to go after this and approach this 
problem. We are not here trying to restrict the Internet. We 
are trying to protect consumers, and nothing is being done, 
other than we will think about it. That is our frustration up 
here.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you very much. I think all of you 
recognize our frustrations with the present system. I think we 
will be having some additional hearings after the August break.
    You will be getting some questions from the two of us to be 
answered. Hopefully we will try to have a date certain, if you 
could be fairly quick in turning that around, that would be 
helpful.
    At this point you are now excused. Thank you very much.
    Our last panel of the morning--afternoon--will include--no, 
it will not be evening--Mr. Carmen Catizone, Executive Director 
of the National Association of Board Pharmacies; Dr. Herman 
Abromowitz, Member of the Board of Trustees of the AMA; Ms. 
Cynthia Culmo, Director of the Division of Drugs and Medical 
Devices from the Texas Department of Health; Mr. William 
Razzouk, CEO of PlanetRx.com; and Mr. Peter Neupert, President 
and CEO of Drugstore.com.
    As you heard from the earlier two panels, we have a 
longstanding tradition of taking testimony under oath. Do any 
of you have objection to that? Do any of you desire to have 
counsel to protect you in the future?
    [Witnesses sworn.]
    Mr. Upton. Thank you. You are now under oath. Mr. Catizone, 
we will start with you. Again, the rule is your entire 
testimony is made part of the record. If you could try to limit 
your remarks to no more than 5 minutes, it would be terrific.

 TESTIMONY OF CARMEN A. CATIZONE, EXECUTIVE DIRECTOR, NATIONAL 
ASSOCIATION OF BOARD PHARMACIES; HERMAN I. ABROMOWITZ, MEMBER, 
  BOARD OF TRUSTEES, AMERICAN MEDICAL ASSOCIATION; CYNTHIA T. 
 CULMO, DIRECTOR, DIVISION OF DRUGS AND MEDICAL DEVICES, TEXAS 
DEPARTMENT OF HEALTH; WILLIAM RAZZOUK, CHIEF EXECUTIVE OFFICER, 
      PLANETRX.COM; AND PETER NEUPERT, PRESIDENT AND CEO, 
                         DRUGSTORE.COM

    Mr. Catizone. Thank you, Mr. Chairman. I am not sure if the 
Gillespie Pharmacy is the same Bob Gillespie that I used to 
interact with, who is a former member of the Michigan Board of 
Pharmacy and a past president of it.
    Mr. Upton. I am sure that it was.
    Mr. Catizone. He was an outstanding gentleman and 
pharmacist.
    Mr. Upton. He also had a brother that was a police chief, 
so it is good that you stood on the good side.
    Mr. Catizone. Thank you. Mr. Chairman and members of the 
subcommittee, I represent the National Association of Boards of 
Pharmacy, which is the independent and impartial association of 
State licensing authorities in the United States, the Virgin 
Islands, Puerto Rico, Guam, 9 provinces of Canada, 3 Australian 
States, and New Zealand.
    NABP's extensive research into this new and engaging area 
have identified a wide array of legitimate practices as well as 
unscrupulous and dangerous on-line activities. The Verified 
Internet Pharmacy Practice Sites program is the beginning of a 
developing program to support the regulatory efforts of the 
State boards of pharmacy to better police Internet pharmacies.
    VIPPS employs a multifaceted approach that combines the 
enforcement of laws, regulations, and the recently developed 
and validated Internet practice standards with effective 
consumer education and empowerment.
    Of the 400 sites which the committee members have spoken 
about this morning, we have broken down those sites into 
additional subdivisions. One hundred eighty-three of those 
sites are devoted exclusively to the distribution of Viagra; 
150 of those sites have been identified as to the registrant 
State of origin; 30 of those sites are foreign registered; 20 
States actually hold licensure.
    I would make an offer to Mr. Stupak and other members of 
the committee that if they would turn over to us that list of 
400 pharmacies, or 200 pharmacies, that you have in your 
possession, within a few weeks' time we will provide to you 
information as to which sites and which pharmacies are actually 
licensed by State authorities in the United States.
    The practices of those sites, the most egregious sites, to 
make prescription medications available to consumers without a 
legitimate patient-prescriber relationship, and thus without a 
valid prescription order, are not only dangerous but, the 
opinion of NABP, illegal.
    It is NABP's further position that pharmacists and 
pharmacies dispensing prescription medication also pursuant to 
an invalid patient-prescriber relationship, are acting 
illegally and are subject to disciplinary action by the 
appropriate State board of pharmacy. State boards of pharmacy 
and medicine are developing the regulatory tools and have in 
place many of the regulatory tools they need to curb these 
illegal activities.
    The most recent example of such actions occurred in 
Missouri, when the Missouri Attorney General obtained a 
temporary restraining order to halt the operations of a 
pharmacy licensed in Texas, prohibited a physician involved, 
who was involved in the situation from using on-line 
consultations to support prescriptions, and enjoined the 
pharmacy to indicate on its Web site that consumers in Missouri 
were not able to purchase or obtain prescriptions from that 
pharmacy.
    This recent action by the State of Missouri is significant 
in many regards. First, it demonstrates the willingness of 
States to act on the inappropriate action of practitioners and 
pharmacies located in other States. Second, it demonstrates the 
ability of these States to take quick and prompt action in 
these critical situations. Third, the current regulatory powers 
of the State also provide the means for those pharmacists and 
pharmacies to be prohibited from practicing in all 50 States.
    An Internet site earning NABP's VIPPS must meet and 
demonstrate compliance with all mandatory licensure, statutory 
and regulatory requirements of State practice acts. There is no 
variance from this requirement. NABP will independently verify 
this compliance directly with the States through its national 
clearinghouse and data base program and physical onsite 
inspections of sites and affiliated facilities. The NABP VIPPS 
seal will inform consumers that the on-line site is a 
legitimate practice site licensed or registered with a State 
agency. It will also provide the consumer with important 
information about the site and how to contact the appropriate 
governmental agency to record a concern or complaint.
    The National Association of Boards of Pharmacy believes 
that existing State laws and regulations, in conjunction with 
the VIPPS program and our partnership with the Food and Drug 
Administration and other Federal agencies, as well as the State 
medical boards, provide an effective means to regulate and 
monitor U.S.-based on-line sites. NABP acknowledges that 
foreign-based on-line sites are outside the jurisdiction of the 
State boards of pharmacy and operating without restriction or 
control, and are endangering the citizens of the United States. 
We support legislation and intensified efforts to curb the 
activities of these foreign based on-line sites.
    We are grateful to the committee for your deliberations on 
this timely and significant issue, and we offer any assistance 
we can provide to your deliberations and actions.
    Thank you.
    [The prepared statement of Carmen A. Catizone follows:]
Prepared Statement of Carmen A. Catizone, Executive Director/Secretary, 
               National Association of Boards of Pharmacy
    Mr. Chairman and members of the Committee, I am Carmen A. Catizone, 
Executive Director/Secretary of the National Association of Boards of 
Pharmacy (NABP). NABP is the professional organization, whose 
membership consists of the state boards of pharmacy in all 
jurisdictions of the United States, the Virgin Islands, Puerto Rico, 
Guam, nine provinces of Canada, three Australian states, and New 
Zealand. NABP is the international, independent, and impartial 
Association that assists its member boards and jurisdictions in 
developing, implementing, and enforcing uniform standards for the 
purpose of protecting the public health.
    The availability of prescription medications online is a relatively 
new occurrence, which provides certain benefits, as well as significant 
risks, to consumers. NABP's extensive research into this new and 
emerging area identified a wide array of legitimate practices and 
business operations as well as unscrupulous and dangerous online 
activities conducted with no apparent regard for laws, regulations, or 
the personal well being of the individuals accessing the sites. The 
Verified Internet Pharmacy Practice Sites TM (VIPPS 
TM) program was developed by NABP to support the regulatory 
efforts of the state boards of pharmacy to better police Internet 
pharmacies. VIPPS employs a multifaceted approach that combines the 
enforcement of laws, regulations, and recently developed and validated 
Internet practice standards with effective consumer education and 
empowerment.
                        overview of online sites
    NABP identified more than 150 pharmacy-based and a comparable 
number of prescribing-based sites currently available to the public 
through the legitimate areas of the Internet and the use of 
conventional search engines. In the context of our research, pharmacy-
based sites are defined as those sites that do not offer prescribing 
services and are associated with an identifiable pharmacy licensed/
registered by a state board of pharmacy in the United States. 
Prescribing-based sites are defined as those online outlets that 
provide medications to consumers utilizing a cyberspace consultation or 
questionnaire. Almost without exception, the pharmacy-based sites are 
located in the United States and its territories and regulated by a 
state agency. The prescribing-based sites are a complex mix of 
operations, based both in the United States and its territories and 
foreign countries. The most egregious and dangerous sites NABP 
identified are certain prescribing-based sites that operate outside the 
jurisdiction of the United States with little or no regard for the laws 
and regulations of the states.
    The practices of these sites to make prescription medications 
available to consumers without a legitimate patient-prescriber 
relationship, and thus, without a valid prescription order, are not 
only dangerous but, in the opinion of NABP, illegal.
    The prescribing-based sites are often organized into an intricate 
arrangement of portals and relocator pages designed to increase the 
accessibility to the services and mislead the consumer into believing 
that such sites are legitimate simply because of the vast number of 
similar sites. The system resembles fraudulent ``pyramid operations'' 
where a primary operation is often supported by a varying number of 
referral or access portals. To the unknowing consumer, the referral or 
relocator pages appear to be independent and individual sites. In 
reality, however, such sites are linked and serve only as a means for 
the primary site to forward sales into its distribution operations.
              state regulation of u.s.-based online sites
    Online sites located within the U.S. and its territories can be 
effectively controlled by the state agencies constitutionally empowered 
to regulate the practices of pharmacy and medicine. It is NABP's 
position that initiatives to circumvent this authority and assign 
responsibility for the activities of U.S.-based online sites to federal 
agencies are unwarranted and preempt the constitutional authority of 
the states to regulate professionals through the police powers.
    Although NABP and its member boards work closely with our 
counterparts in medicine, it is not appropriate for us to comment on 
their activities or scope of authority beyond addressing a critical 
question concerning the online prescribing of medications. It is our 
interpretation of state medical practice acts that the primary 
component of the practice of medicine is a valid patient-prescriber 
relationship. NABP's research into online sites indicates that sites 
operating illegally are ignoring this requirement and confusing the 
public by inappropriately defining the use of questionnaires or 
cyberspace consultations as constituting a valid patient-prescriber 
relationship.
    The Board of Trustees of the American Medical Association, in a 
report issued in June 1999, challenged the use of questionnaires and 
online consultations that fail to include: (1) the examination of the 
patient, (2) dialogue with the patient, (3) establishment of a reliable 
medical history, (4) providing information to the patient about the 
prescribed medication, and (5) follow-up with the patient to assess the 
therapeutic outcome. The report states further that, ``Under existing 
law in the majority of states, prescribing drugs to a patient outside 
the state where the physician is licensed is considered the unlicensed 
practice of medicine.'' It is our belief that state boards of medicine 
can, and will, effectively regulate these practices and establish 
appropriate regulations for the prescribing of medications online.
    It is NABP's position that pharmacists and pharmacies dispensing 
prescription medications pursuant to an invalid patient-prescriber 
relationship are acting illegally and are subject to disciplinary 
action by the appropriate state board of pharmacy.
    The regulation of the practice of pharmacy is rooted in state 
practice acts and regulations enforced by the state boards of pharmacy. 
The practice acts and regulations of all U.S. jurisdictions prohibit 
any entity from operating or representing itself to the public as a 
pharmacy without licensing/registering with the appropriate state 
agency, complying with all applicable state and federal laws, and 
undergoing periodic and/or routine inspections.
    Generally, the state boards have the authority to regulate online 
pharmacies pursuant to existing practice acts under which they 
presently regulate traditional in-state and out-of-state pharmacies 
that distribute or dispense drugs within the state borders. Out-of-
state pharmacies' regulations focus specifically on this practice 
sector and provide state boards of pharmacy with the enforcement 
mechanisms needed to regulate their activities. The NABP 1998-99 Survey 
of Pharmacy Law notes that forty (40) U.S. jurisdictions require the 
licensure/registration of out-of-state pharmacies (Attachment ``A''). 
An example of specific state regulations governing out-of-state 
pharmacies is included (Attachment ``B'').
    State boards of pharmacy and boards of medicine acting to curb the 
illegal and dangerous activities of online pharmacies have been 
effective in closing sites and disciplining practitioners. The most 
recent example of such actions occurred in Missouri, when the Missouri 
Attorney General obtained a temporary restraining order to halt the 
operations of a pharmacy licensed in Texas. The attached press release 
(Attachment ``C'') notes that the Texas physician involved is 
prohibited from using online consultations to support prescriptions and 
the dispensing pharmacy must include a notice on its Web site alerting 
consumers that its services are not available to consumers living in 
Missouri. This recent action by Missouri is significant in many 
regards. First, it demonstrates the willingness of states to act on the 
inappropriate practices of online distributors of prescription 
medications. Second, it demonstrates the ability of states to regulate 
and discipline pharmacies located in other states.
           principles of understanding with the fda and fsmb
    NABP has also executed an agreement with the Food and Drug 
Administration (FDA) and Federation of State Medical Boards (FSMB) to 
agree in principle to work cooperatively to encourage the enforcement 
of applicable statutes and regulations, including the Federal Food, 
Drug, and Cosmetic Act (FFDCA) and implementing regulations and state 
statutes and regulations as regards such conduct, and to work towards 
developing formal agreements to this effect. The parties of the 
``Principles of Understanding'' recognize that a cooperative effort of 
state and federal authorities is the best means for resolving this 
problem and ensuring the safety and welfare of the citizens we serve.
                   complementary disciplinary actions
    The Missouri action is also significant because of the 
ramifications it may hold for the pharmacist and pharmacy. NABP 
currently maintains a National Disciplinary Clearinghouse and Database. 
The NABP Clearinghouse and Database contains licensure and disciplinary 
information on pharmacists, pharmacies, technicians, interns, and 
wholesale distributors. The NABP Clearinghouse and Database is 
maintained by the state boards of pharmacy through NABP and utilized by 
the states to determine the qualifications of individuals and entities 
seeking licensure in their jurisdictions. It is also used by states to 
determine when it is necessary to take action against local licensees 
who hold licenses in other states and are disciplined by another state 
board of pharmacy. For example, a pharmacist licensed in States A, B, 
and C commits a serious violation of State A's practice act and, after 
due process, has his/her license to practice in State A revoked. Once 
that action is finalized, it is provided to NABP's Clearinghouse and 
Database and disseminated to the states in which the pharmacist 
currently holds licensure (as noted by NABP's Clearinghouse and 
Database) and to all other member states of NABP.
    State practice acts and regulations empower the other states where 
that pharmacist holds licensure to take appropriate action against 
those licenses based upon the revocation of licensure by State A. In 
most cases, such severe action by State A will result in States B and C 
taking similar disciplinary action and revoking the pharmacist's 
license. These actions are again reported to the NABP Clearinghouse and 
Database and reported to all states, specifically to states where the 
pharmacist may be seeking licensure. A pharmacist whose license has 
been revoked will have little chance of obtaining licensure in a new 
state until the license in the original state(s) is restored to good 
standing.
    The ability of state boards of pharmacy to discipline licensees 
based upon the actions of other states where the licensee holds 
licensure is an important enforcement tool utilized by the state boards 
of pharmacy to effectively halt illegal and dangerous activities.
                   nabp's vipps TM program
    The NABP VIPPS program is a voluntary program that combines the 
mandatory requirements of state regulation with Internet practice 
standards developed by an expert panel of providers, federal agencies, 
and state regulators. The actual operation of the VIPPS program is 
detailed in NABP's response to the Committee's questions of July 1 
(Attachment ``D'').
    An Internet site earning NABP's VIPPS seal must meet and 
demonstrate compliance with all mandatory licensure, statutory, and 
regulatory requirements of state practice acts. There is no variance 
from this requirement. NABP will independently verify this compliance 
directly with the states through its Clearinghouse and Database and 
onsite inspections of the sites and affiliated facilities. The NABP 
VIPPS seal will inform consumers that the online site is a legitimate 
practice site licensed or registered with a state agency. It will also 
provide the consumer with important information about the site and how 
to contact the appropriate governmental agency to record a concern or 
complaint. The NABP VIPPS seal will direct consumers to the NABP Web 
site to confirm the site is legitimate and provide additional 
information about the online site. Elaborate security measures are 
being employed to avoid misrepresentation or inappropriate duplication 
of the NABP VIPPS seal. This information is presented in more detail in 
our response to the Committee's July 1 questions (Attachment ``D'').
                               conclusion
    The National Association of Boards of Pharmacy believes that 
existing state laws and regulations in conjunction with its VIPPS 
program provide an effective means to regulate and monitor U.S.-based 
online sites. State boards can be assisted in this regard by the 
provision of funds and the cooperative efforts of federal agencies. 
NABP acknowledges that foreign-based online sites may be outside of the 
jurisdiction of the state boards of pharmacy and operating without 
restriction or control. Legislation and intensified efforts to curb 
these activities are desired and needed.
    NABP is grateful to assist the Committee in its deliberations for 
this timely and significant issue of public health. We ask the 
Committee to carefully consider any action that would preempt state 
authority by assigning legal responsibility for any aspect of the 
regulation of pharmacy practice to federal authority. Such an action 
will not address the serious problems and actions of the foreign-based 
online sites and only precipitate a regulatory quagmire of conflict and 
confusion between state and federal agencies. Thank you for providing 
NABP with this opportunity to testify on this most important subject 
matter.
    [Attachments A-D are retained in subcommittee files.]

    Mr. Bryant [presiding]. Thank you.
    Dr. Abromowitz.

               STATEMENT OF HERMAN I. ABROMOWITZ

    Mr. Abromowitz. Mr. Chairman, members of this subcommittee, 
my name is Herman Abromowitz, and I am a member of the American 
Medical Association board of trustees and I'm a practicing 
family and occupational medicine physician in Dayton, Ohio. We 
thank you for the opportunity to appear before this 
subcommittee.
    Let's look at the serious problems associated with Internet 
prescribing. The AMA is concerned that some prescription drugs 
are ordered and dispensed over the Internet in a manner that 
clearly constitutes dangerous medical practice. This raises 
very serious ethical questions and puts patients at great risk.
    The American Medical Association's council on Ethical and 
Judicial Affairs is currently reviewing the entire spectrum of 
telecommunications, Internet, e-mail telemedicine, and their 
impact on the overall physician-patient relationship.
    Often Web sites request insufficient data to fill a 
prescription and provide limited information about the 
prescription, including potential risk. Drugs may be provided 
without a physician's consultation and, worse, the prescribing 
physician and may never have obtained or have ready access to a 
patient's medical history. Further, there is no physical 
examination or follow-up.
    For example, as noted today many times, a typical Web site 
advertising Viagra will require the patient to waive liability, 
select a quantity of Viagra, and fill out a very short 
questionnaire. It is that easy, ladies and gentlemen, and 
potentially fatal. There is no verification of the accuracy or 
truth of the patient's statement electronically, and the 
physician is not able to use clinical expertise and 
professional judgment to evaluate the appropriateness of this 
medication for this patient.
    Neither is there any discussion of the substantial risk, 
including death. These Internet prescribing practices are 
compounded by the fact that some foreign companies, as noted 
today, are illegally selling prescription drugs in the United 
States through their Internet Web sites. This may permit 
patients in the U.S. To obtain non-FDA-approved drugs without a 
prescription and/or advice of a physician. This could threaten 
the whole concept of prescription drugs in the U.S., which 
would be extremely dangerous to patients.
    Drugs may be contraindicated and may react to other 
medications the patient is currently taking; the patient may be 
allergic to a drug; and the risk, including death, are greatly 
enhanced, because there has not been any direct physician-
patient relationship.
    In my personal opinion as a practicing physician for over 
30 years, it is vital and in the patient's best interests to 
have a direct onsite visit with their physician before taking 
new or changing medications. Otherwise you are potentially 
risking your life, as dramatic as it may seem. I ask you: Would 
any of you take medication not prescribed for you by your own 
physician? If so, I would like to talk to you after this 
meeting.
    Obviously there is an urgent need to establish medical 
safeguards to restrict these dangerous prescribing practices. 
The American Medical Association has several recommendations:
    One, a physician must establish or have ready access to 
reliable medical history, which generally should include a 
physical examination of the patient. Otherwise this is far 
below the accepted standard of care.
    Two, there must be a dialog between the physician and the 
patient to discuss treatment.
    Three, the physician should inform a patient about a drug's 
benefits and risks.
    Four, the physician should have appropriate follow-up to 
assess patient outcome.
    What can we do to ensure that safety requirements are met 
with regard to Internet prescribing practices? The AMA will 
continue to develop principles for appropriate use of the 
Internet in prescribing medications and will coordinate our 
efforts with other professional organizations.
    As noted today, for example, we are working with the 
National Association of the Boards of Pharmacy to develop its 
Verified Internet Pharmacy Practice Sites program. We also 
expect to work with State and Federal authorities along with 
State medical societies. States generally have primary 
jurisdiction over domestic-based Internet prescribing activity, 
and some States currently are investigating physicians for 
inadequate on-line prescribing practices.
    The Federal Government can build on State efforts. The 
American Medical Association supports the FDA's principles 
governing Internet prescribing. The FDA has an important role 
to play in prohibiting foreign companies from illegally selling 
unapproved and approved prescription drugs over the Internet.
    While State and Federal authorities and professional 
organizations must all coordinate efforts to assure appropriate 
Internet prescribing practices, I mention a word of caution: We 
need to protect and even enhance legitimate electronic 
prescribing and dispensing practices. For example, a number of 
licensed Internet pharmacy sites allow computer order entry and 
on-line transmission of prescriptions ``after,'' after a 
physician has seen the patient.
    Let me conclude by saying that as we discuss this fast-
changing world of Internet prescribing and telecommunications, 
please refer to the time-honored oath of Hippocrates, taken by 
your physician and myself: Do no harm.
    Thank you. I am happy to answer any questions later. Thank 
you, Mr. Chairman.
    [The prepared statement of Herman I. Abromowitz follows:]
Prepared Statement of Herman I. Abromowitz, Member, Board of Trustees, 
                      American Medical Association
    The American Medical Association (AMA) appreciates the opportunity 
to present to the Subcommittee its views on prescribing pharmaceuticals 
over the Internet, and applauds the efforts of the Chairman and members 
of the Subcommittee for focusing on this important issue.
    The use of the Internet for prescribing and dispensing medications 
is a practice that has become increasingly prevalent during recent 
years as the Internet has become more popular and accessible to 
consumers. The Internet can be an extremely valuable medical resource 
under certain circumstances, and there currently are many legitimate 
uses of the Internet for prescribing and dispensing medications. The 
AMA, however, is gravely concerned about current misuse of the Internet 
for prescribing purposes. The Food, Drug and Cosmetic Act requires 
physician involvement in making prescription drugs available. This 
requirement is part of the safety analysis conducted by the Food and 
Drug Administration (FDA) prior to the approval of any new drug.
    Everyday patients are endangered when they are permitted to receive 
prescription medications via the Internet without adherence to proper 
safeguards that ensure good medical practice. Use of the Internet does 
not obviate the physician's obligation to meet appropriate standards of 
care when treating any patient.
    Recently the AMA considered Internet prescribing issues and set 
forth its concerns with this matter. Today our testimony addresses the 
concerns that must be considered in connection with misuse of the 
Internet for prescribing and dispensing prescription drugs.
    In summary, we believe that before prescribing a medication, a 
physician must--

 Ensure that a medical history is obtained or readily 
        available;
 Provide information to the patient about the benefits and 
        risks of the prescribed medication;
 Generally perform an examination of the patient to determine a 
        specific diagnosis and whether there actually is a medical 
        problem; and
 Initiate additional interventions and follow-up care, if 
        necessary, especially when the drug in question (e.g., 
        Viagra') may have serious side effects.
    These are the requirements that a physician must meet in a setting 
traditionally used to visit with and treat patients. Treating patients 
via the Internet is no different, and thus these same requirements must 
also be met in this context. Web sites that offer a prescription solely 
on the basis of a simple questionnaire are not sufficient.
The Problem with Internet Prescribing
    Internet prescribing has become more prevalent with the advent of 
certain drugs, such as sidenafil (Viagra'), a prescription 
drug used to treat erectile dysfunction. Often, the information 
requested on a web site that is necessary to issue and fill a 
prescription via the Internet is insufficient, as is accompanying 
information that should be provided to the patient concerning the 
prescription.
    For example, a typical web site will advertise the advantages of 
obtaining Viagra' via the Internet. In addition, the web 
site will require the purchaser to acknowledge a liability waiver, 
select a quantity of Viagra' to be purchased, and fill out a 
short questionnaire. An example of such questionnaire is attached as 
Appendix I.
    The questionnaire used does not meet standards that would be 
considered good medical practice. It usually requests minimal 
information about the medical history of the purchaser, and some terms 
used in the questionnaire (e.g., nitrates, arrhythmia, unstable angina, 
retinitis pigmentosa) are likely to be beyond the level of 
understanding of a lay person. Further, there is no mechanism to 
determine whether the purchaser has answered the questions accurately 
or truthfully. Incorrect answers could be deliberate in order to obtain 
the medication or could result from a failure to understand the 
questions. Moreover, some web sites make no attempt to explain the 
potential risks of a drug, such as Viagra' therapy, for 
example.
    More important, the AMA is very concerned that prescription drugs 
are being ordered without the benefit of a physical examination, which 
allows full evaluation of any potential underlying cause of a patient's 
dysfunction or disease, as well as an assessment of the most 
appropriate intervention. Clearly, current Internet prescribing 
practices for the most part do not involve any medical assessment or 
follow-up to determine whether the medication has been effective or if 
there are side effects.
    This type of prescribing practice can be extremely dangerous for 
patients. For example, while Viagra' has been beneficial to 
many men with properly diagnosed erectile dysfunction, it also carries 
substantial risks for some patients and over 100 deaths have been 
associated with its use. Without appropriate information and discourse 
between physician and patient, there is a substantial risk that a drug 
may inappropriately be prescribed via the Internet that may cause 
significant harmful side effects and even death.
    Without medical standards to serve as a safeguard against these 
dangerous practices, Internet prescribing could become extremely 
problematic. Indeed, prescriptions for an increasing variety of 
prescription drugs may become available to the public through the 
Internet. Appendix II presents just a few examples of the many Internet 
prescription and dispensing services, and many more such services exist 
on the Internet. According to an article published June 16, 1999 in the 
Chicago Tribune: ``No one has a clear grasp of the scope of the 
phenomenon, but some experts estimate that about 400 such instant-
prescription Web sites exist, about half based overseas.''
    Internet prescribing problems are compounded by the fact that some 
foreign companies are illegally promoting and distributing (selling) 
prescription drug products in the United States through their Internet 
web sites. A recent example of this was described in an article 
published May 11, 1999 in the New York Times: ``a company based in the 
Channel Islands of Britain called Direct Response Marketing is selling 
Xenical over the Internet to just about anybody who electronically 
fills out a medical questionnaire that is reviewed by a company doctor 
who then `prescribes' the drug.'' ``This wonder pill promises to be one 
of the defining drugs of the 90's along with Prozac and Viagra'' the 
company states on its World Wide Web site. ``Most overweight people 
harbor a sneaking suspicion that somewhere there is a product that will 
solve all of their weight-loss problems. Well, now that product has 
arrived.''
    If this trend continues, a triple problem exists. First, patients 
in the United States would easily be able to obtain drugs that have not 
been approved by the U.S. FDA. Second, these drugs would not have been 
tested in rigorous clinical trials; and third, patients would be 
receiving these drugs without the advice of a physician. There 
virtually is no accountability and there are no safeguards that address 
drugs obtained from foreign web sites. You should not allow this trend 
to continue. Accordingly, we again emphasize the importance of ensuring 
that minimum standards of proper medical care are met with respect to 
prescribing, including Internet prescribing.
Minimum Standards for Proper Medical Care
    To avoid the serious problems discussed above, the AMA strongly 
advocates that diagnostic and treatment decisions made by physicians, 
including the issuing of a prescription for medication via the Internet 
or any setting, should be supported by appropriate information. The 
evaluation leading to diagnostic and treatment decisions generally 
includes an adequate medical history and an appropriate physical 
examination. The length and complexity of this evaluation often is 
dependent upon the problem being presented by the patient. At times, 
the history and/or the physical examination may not need to be repeated 
if it is already on record as part of an ongoing relationship between 
patient and physician.
    The AMA strongly believes prescribing practices over the Internet 
must at least meet the following minimum standards of care--

 There generally must be an examination of the patient to 
        determine a specific diagnosis and whether there actually is a 
        medical problem;
 There must be a dialogue between the physician and patient to 
        discuss treatment alternatives and determine the best course of 
        treatment;
 The physician must establish or have ready access to a 
        reliable medical history;
 The physician must provide information to the patient about 
        the benefits and risks of the prescribed medication; and
 The physician must follow-up with the patient to assess the 
        therapeutic outcome.
AMA Involvement in Ensuring Proper Internet Prescribing Practices
    The AMA will continue its involvement in studying the issue of 
Internet prescribing practices. Recently, the AMA adopted a report on 
Internet prescribing at our June 1999 annual meeting, and it included a 
number of recommendations for AMA involvement in ensuring proper 
medical practice with respect to Internet prescribing practices.
    In accordance with these recommendations, the AMA will, among other 
things, develop principles describing appropriate use of the Internet 
in prescribing medications. These principles likely will be based on 
the guidelines discussed in the June report and this testimony, and 
will support use of the Internet as a prescribing mechanism where 
appropriate safeguards are in place to ensure standards for high 
quality medical care.
    In addition, the AMA will work with state medical societies in 
urging state medical licensing boards to ensure high quality medical 
care by investigating and, when appropriate, taking necessary action 
against physicians who fail to meet local standards of medical care 
when issuing prescriptions through Internet web sites that also 
dispense prescription medications. Finally, as discussed further below, 
we believe there is a strong role that both state and federal 
authorities can play in this matter. We wish to work with the 
Federation of State Medical Boards and others in endorsing or 
developing model state legislation to establish limitations on Internet 
prescribing, as well as with federal and state regulatory bodies to 
close down Internet web sites of companies that are illegally promoting 
and distributing (selling) prescription drug products in the United 
States.
    Finally, we will continue our review of legitimate uses of the 
Internet and update our recommendations concerning proper standards of 
practice on the Internet as changes in technology may dictate changes 
in these standards or even permit additional legitimate Internet 
prescribing practices.
Legitimate Uses of the Internet for Prescribing and Dispensing Drugs
    As discussed above, despite problems with misuse of the Internet 
for prescribing and dispensing, the Internet can be a valuable source 
for prescription medications, and a number of appropriately licensed 
Internet pharmacy practice sites are legitimately dispensing 
prescription medications pursuant to a valid prescription. Care must be 
taken to protect and even enhance legitimate electronic prescribing and 
dispensing practices.
    Some examples of the Internet being used for legitimate electronic 
prescribing purposes are:

 Computer order entry and on-line transmission of 
        prescriptions. After a physician sees a patient and performs an 
        adequate medical history and physical, computer order entry and 
        on-line transmission of a prescription to a pharmacy provides 
        an alternative mechanism for prescription transmission. Many 
        experts believe computer order entry of prescriptions can 
        reduce errors that occur from failure to understand handwritten 
        prescriptions. Because technology exists to allow validation of 
        electronic signatures and the encryption of prescription 
        information, even the Drug Enforcement Administration (DEA) is 
        considering allowing this route of prescription ordering, 
        including the ordering of Schedule II drugs.
 Ordering refills--either patient to pharmacy or physician to 
        pharmacy. There is a legitimate clinical decision under 
        circumstances where the physician does not see the patient at 
        the time a refill is ordered, but the patient has been and 
        remains under that physician's care and has been seen in person 
        in the recent past. If the refills are authorized on the 
        original prescription, the patient can electronically contact 
        the pharmacy directly and request the refill. This could be a 
        community, mail service, or legitimate Internet pharmacy. When 
        no refills are remaining on the original prescription, the 
        patient could call or electronically contact the physician 
        requesting that a refill be authorized. If the physician 
        believes the refill is needed, the physician can electronically 
        send the renewed prescription to the pharmacy.
 Electronic consults between physician and patient where the 
        outcome is an ordered prescription. There can be a legitimate 
        clinical decision under circumstances where the physician does 
        not see the patient at the time a new prescription is ordered. 
        This occurs when the patient is under that physician's care, 
        the physician has the patient's medical history and physical 
        information in the medical record, and the patient has been 
        seen in person in the recent past. For example, a patient may 
        inform his or her physician via telephone or electronic mail of 
        a flare up in a seasonal allergy or a documented problem, and 
        the physician may then electronically transmit a prescription 
        for an antihistamine to the pharmacy without an additional 
        office visit. It is critical here that the physician and 
        patient have an ongoing relationship, the patient routinely 
        uses this physician, and the patient's history and physical 
        information are already in the medical record.
    In addition to legitimate electronic prescribing via the Internet, 
there also are appropriately licensed Internet pharmacy practice web 
sites that provide an alternative consumer option for the dispensing of 
prescriptions. Recently, the National Association of Boards of Pharmacy 
(NABP) announced its decision to develop the NABP Verified Internet 
Pharmacy Practice Sites (VIPPS) program. The VIPPS program will verify 
the licensure of Internet pharmacy practice sites and inform the 
public, through a database on the NABP web site, about whether those 
web sites are licensed in good standing with the appropriate state 
board(s) of pharmacy or other regulatory agencies. The AMA has 
participated on a NABP Task Force to develop criteria for the VIPPS 
program, and will continue to work with the NABP and support their 
VIPPS program so that physicians and patients can easily identify 
legitimate Internet pharmacy practice sites.
State and Federal Involvement in Internet Prescribing
    The AMA believes that Internet prescribing practices not based on 
appropriate safeguards to ensure high quality medical care are 
dangerous and highly inappropriate. State authorities, including state 
medical and pharmacy boards, as well as the federal government have a 
significant role to play in restricting these practices, but must take 
care not to interfere with legitimate uses of the Internet.
    For the most part, states have primary jurisdiction in these 
matters, and this is appropriate. Under existing law in the majority of 
states, prescribing drugs to a patient outside the state where the 
physician is licensed is considered the unlicensed practice of 
medicine. Additionally, under most state laws, state medical and 
pharmacy licensure boards have been delegated jurisdiction, 
respectively, over medical and pharmaceutical professional practices.
    Every state medical board agrees that prescribing drugs without 
physically examining a patient or reviewing his or her medical records 
is, in most cases, practicing medicine at a level far below the 
acceptable standard of medical care. However, at the close of the 1998 
state legislative sessions, there were no state laws or regulations 
directly addressing the issue of Internet prescribing.
    Some state licensing boards (Arizona, Colorado, Connecticut, 
Illinois, Nevada, New Jersey, Ohio, Texas, Washington, and Wyoming) are 
continuing or initiating investigations into physicians who participate 
in Internet prescribing. For example:

 On May 3, 1999, the Washington Medical Quality Assurance 
        Commission initiated a licensure action against a Seattle 
        physician for unprofessional conduct for prescribing 
        Viagra' based only on questionnaires completed over 
        an Internet drug-sales site. According to the Commission, the 
        physician was earning $5,000 a month for performing automated 
        online medical reviews.
 On May 5, 1999, the Illinois Professional Regulation 
        Department suspended the license of a physician who was writing 
        Viagra' prescriptions for a pharmacy web site based 
        on a one-page health form and an $85 consultation charge. There 
        was no examination or discussion with the patient. On May 20, 
        the physician's license was reinstated after he agreed to stop 
        prescribing drugs over the Internet or for patients he has not 
        examined. The physician was ordered to pay a $1,000 fine.
    These state medical licensure boards are acting well within their 
authority to uphold the standard of medical care when they investigate 
physicians who participate in Internet prescribing, and the AMA 
encourages state boards to investigate any physician or pharmacy that 
participates in any improper Internet prescribing practices.
    Further, as discussed above, the AMA will be working with state 
boards to establish standards that ensure adherence to proper Internet 
prescribing practices. In addition, we expect that states will be 
maintaining their efforts in regulating prescription-selling web sites. 
It is reasonable to expect that state lawmakers will begin to explore 
various methods of regulating the manner and in what medium 
prescription drugs and other medical treatments may be prescribed.
    Moreover, the Federation of State Medical Boards (FSMB) is 
addressing the issue of prescribing medications via the Internet. At a 
February 8, 1999, meeting convened by the FDA on this issue, a FSMB 
representative stated that its Committee on Professional Conduct and 
Ethics had taken a position that it is unprofessional conduct for a 
physician to provide treatment recommendations, including the 
prescribing of medications, without taking an adequate medical history 
and doing a physical examination. It is our understanding, however, 
that this Committee's final report is not scheduled for consideration 
and possible adoption by the FSMB until next year.
    In addition to state activity, the federal government also has a 
role to play in ensuring appropriate Internet prescribing practices by 
assisting and building on these state efforts. Indeed, this is already 
occurring. For example, Pfizer, the manufacturer of Viagra', 
has filed a complaint with the Federal Trade Commission (FTC) asking 
the FTC to assert authority over Internet prescribing of 
Viagra' and to proceed against those who dispense 
Viagra' on-line without adequate safeguards. According to 
the complaint, Internet sale of Viagra' where a prescription 
is obtained based on responses to a questionnaire is inadequate for a 
diagnosis and does not adequately convey the risks of the product, 
including: (i) risk of concomitant use of nitrates (resulting in 
possible heart failure from a large and sudden loss of blood pressure 
when taken in conjunction with heart medication), (ii) underlying 
medical problems that go undiagnosed because there is no real physical 
examination, and (iii) risk arising from sexual activity itself.
    The federal government, especially the FDA, also has an especially 
important role to play with respect to addressing web sites of 
primarily foreign companies that are illegally promoting and 
distributing (selling) unapproved and approved prescription drug 
products in the United States, as discussed above. These web sites have 
multiplied with the growth of the Internet. Typically, these companies 
will post a price list and advertise that they can sell United States-
patented prescription drug products at greatly reduced prices. In many 
cases, the advertisements state that the medication can be ordered and 
obtained without a prescription.
    Among the concerns with illegal distribution of drugs from foreign 
sources is the product quality of these ``foreign versions'' of 
prescription drugs and whether patients are at risk of harm due to lack 
of physician oversight and inadequate directions for use. If obtaining 
prescription drugs from foreign companies without a prescription 
through the Internet becomes common, it threatens potentially to render 
the whole concept of legend (by prescription only) drugs meaningless in 
the United States. While the FDA has used its authority to prevent this 
illegal activity by some foreign companies, it has been difficult to 
stop these and other companies from simply continuing these illegal 
activities from another web site.
    In accordance with the above, it is clear that improper and illegal 
Internet prescribing practices threaten traditional mechanisms that 
have been long-established to ensure good medical practice when 
prescribing and dispensing prescription drugs to patients. An FDA-
developed document, entitled, Principles of Understanding on the Sale 
of Drugs on the Internet, addresses this concern, and we endorse these 
principles.
    The AMA believes the states and their medical boards must carefully 
develop standards that continue to ensure such good medical practice 
when the Internet is used to prescribe and/or dispense prescription 
drugs, without impeding legitimate use of the Internet. State medical 
boards must also initiate investigative and enforcement efforts of 
physicians who violate these standards. These state activities should 
be accomplished in conjunction with industry organizations, such as the 
AMA, state medical societies and other professional entities discussed 
throughout this testimony. Finally, the federal government should 
coordinate with the states to monitor and facilitate enforcement 
activity with respect to illegal, domestic-based Internet prescribing 
activity.
    We thank the members of the Subcommittee for your concern and for 
initiating a review of this important matter. We look forward to 
working with state and federal authorities to establish standards that 
assist in the proper use of the Internet for prescribing practices, and 
stand ready to work with the Subcommittee to further those efforts.
[GRAPHIC] [TIFF OMITTED] T8498.158

[GRAPHIC] [TIFF OMITTED] T8498.159

    Mr. Bryant. Thank you, Doctor.
    Ms. Culmo. You have a ``Mr.'' in front of your name.

                  TESTIMONY OF CYNTHIA T. CULMO

    Ms. Culmo. That is okay. Thank you. Mr. Chairman and 
members, thank you for inviting me here today on behalf of 
Commissioner Archer and the Department. TDH welcomes the 
opportunity to present comments to the subcommittee.
    The Department of Health is involved in the regulation of 
drugs and medical devices and the manufacture and distribution 
and possession in the State of Texas, and we are very much 
involved in the Internet sales and distributions of drugs and 
medical devices.
    Our perspective regarding on-line pharmacies reflects the 
view of a State regulatory agency. Our intent is not to 
prohibit, but place some oversight, so consumers are assured of 
as much safety as possible. We can appreciate the fact that 
technology is rapidly evolving and the concept of telemedicine 
on the surface appears progressive and can serve as a method to 
extend health care and access. The idea and the practices may 
have merit, but some of the actual practices encountered by 
State agencies are of concern, and there are difficulties in 
applying the current laws to these Internet prescribing and 
dispensing businesses.
    The Internet has afforded great benefits which have been 
particularly manifested in the delivery of information and 
education to the public and the enhancements of commerce. But 
such information must be viewed with caution.
    The information provided on the Internet is not reviewed or 
approved by any scientific or regulatory body, and to date no 
one assumes responsibility for the information provided via the 
cyberhighway. As an example, we have encountered pseudo-docs, 
presenting themselves on the Internet as physicians, when in 
reality they are not licensed medical practitioners. Not only 
is this a national concern, requiring uniform regulation; the 
international information should be harmonized and standardized 
in a manner consistent with international harmonization efforts 
that are currently being pursued by several regulatory groups 
around the world for drugs and medical devices.
    Should new national regulations prove successful and 
regulatory actions are initiated as necessary, equal or similar 
international standards and enforcement, the control of foreign 
sites, products, and therapies, will need to be addressed to 
assure international compliance. Once regulatory authority is 
established, then each entity will then have the same or 
similar priorities.
    We are aware this raises a completely different set of 
issues, but want to point out we see benefits as well as 
concerns. We understand that the main benefit of the Internet 
for health care product access is confidentiality and 
convenience. Since a number of prescription drugs obtained from 
the Internet sites are those categorized as lifestyle drugs, 
those for improved sexual performance, weight loss, the 
treatment of hearing, et cetera, the Internet purchasing allows 
one to buy without being seen and affords one the convenience 
of purchasing from home, office, or on the road. But this 
benefit could also be recognized as one of the elements which 
places a customer at an increased risk. The increased risk is 
due to one of the checks and balances placed in our health care 
system being eliminated.
    Safeguards to protect patients from injuries resulting from 
the use of unsafe drugs and devices, unapproved drugs and 
devices, counterfeit drugs and devices, and the illegal 
practice of medicine and pharmacy, have been legislatively 
mandated, both federally and through State legislatures. These 
mandates have included or implied the requirement that a 
patient first be seen and examined by a licensed health care 
practitioner to receive a prescription for prescription drugs 
and/or devices.
    A physician-patient relationship must be established, and 
until the advent of the Internet, this was understood or 
specifically noted in State statutes as physical onsite 
examination. Everyone realizes this is the ideal, and even with 
these mandates, errors occur in the traditional health care 
world. There are occasions in the current system when 
physicians will prescribe for patients without seeing them, but 
it is not the norm.
    The Internet site utilizes questionnaires and/or surveys, 
is creating a situation where this is the norm. These types of 
Internet sales circumvent the elaborate controls that our 
country has placed on dangerous drugs and/or restricted medical 
devices, and thus its risks are increased. These also result in 
the majority of complaints.
    These controls put in place by Congress and the States 
establish the physician oversight and physician responsibility 
for proper use based upon their education, knowledge, 
experience and best practices, as well as the requirement that 
a licensed pharmacist dispense the prescribed drug and/or 
device. There are several pharmacy Web sites which appear to be 
practicing legitimately and similarly to the currently 
regulated mail order pharmacies. These sites are of less 
concern to date.
    These are two examples which highlight problems associated 
with an on-line pharmacy:
    We in Texas just recently had a complaint forwarded to us 
where a pregnant attorney completed a survey and noted on the 
survey that she was pregnant. She received Propecia, a 
prescription drug with significant warnings and precautions for 
women who are or could be pregnant.
    Propecia is strictly contraindicated in women of 
childbearing age, due to causing severe birth defects. The 
survey was supposedly reviewed by the site's medical director 
and he approved the cyberprescription for a pregnant consumer. 
This does not meet the appropriate medical standard of care 
because they offered a prescription for a patient they have 
never seen before, and based solely on an on-line survey. The 
pharmacist also dispensed a prescription and, to our knowledge, 
did not receive the survey as well.
    This demonstrates what happens when safeguards established 
to address products classified as ``dangerous'' are bypassed.
    Another site, to which there are attachments in the packets 
submitted earlier, not using a survey cyberform, but they 
advertise Phen-fen, controlled substances, and steroids as just 
a few examples, available without a prescription. Phen-fen has 
been removed from the market in the United States due to its 
adverse affects. The others on the list are extremely dangerous 
as well.
    There are currently Federal and State drug laws which 
address specific drug and device regulations, and the consumer 
protection acts which address deceptive advertising and sales 
practices. Nonetheless, these are not written to control the 
Internet sales and deliveries from State, national and 
international sources. There are limited resources available to 
the State and Federal regulatory agencies to carry out 
enforcement actions and the emphasis must be placed on the word 
``limited.'' .
    Because there is a common element of limited resources 
between the State and Federal regulatory agencies, interagency 
cooperation in this arena is of particular importance.
    For the sake of time, I will bypass the rest of that.
    Many of the owners of the Internet Web sites have advocated 
a position of opposition to oversight, regulatory oversight. 
The Internet sites, Soma.com in the ``pink sheet'' on April 5, 
1999, was quoted that several ``watchdog organizations'' are 
already reviewing regulation of Internet prescription sales. Of 
the watchdogs referenced in their list who they believe are 
providing oversight, FDA was the only one with requisite 
regulatory authority.
    Another on the list, their list, is NABP, a non-regulatory 
association, the National Association of Boards of pharmacy. To 
us as a regulatory agency, it is of little consequence that a 
pharmacy site does not have one of NABP's verified Internet 
Pharmacy Practice Sites, or the VIPPS. The verification 
information provided by the VIPPS seal could be obtained by the 
consumer via other Internet sites and information. The point 
is, there is no guarantee for the consumers and the self 
regulatory models being proposed by Soma.com.
    At a minimum, if these new prescription drug entrepreneurs 
are to continue their Internet practices, then a start perhaps 
would be a consideration given to a Federal requirement that 
physicians who wish to practice and diagnose and prescribe on 
the Internet be regulated by the State medical boards at those 
Internet locations. We should consider their Web sites as a 
practice location.
    Additionally, the same considerations should be given to 
pharmacists and pharmacies practicing on the Internet. We 
should require licensing for those sites similar to that of 
mail order pharmacies. The sites and persons associated with 
the sites should be required to display their Web-specific 
licenses on their home page. These should be prominently 
located on the home page so the consumer and patient would 
clearly recognize they are conducting business with a 
legitimate site and licensed health care professionals.
    Patchwork enforcement is not effective. Each State has 
different priorities and resources and Federal uniformity, we 
believe, is required.
    In our view, these practices are not benign. They present a 
significant threat to public health and they necessitate 
serious consideration for close standardized and uniform 
regulatory oversight.
    I would like to thank you again for allowing us this time 
to express our concerns, experiences, and views. And in 
closing, we too commit to continuing our time, information, and 
resources in supporting this effort.
    [The prepared statement of Cynthia T. Culmo follows:]
  Prepared Statement of Cynthia T. Culmo, Director, Drugs and Medical 
              Devices Division, Texas Department of Health
    This is the Texas Department of Health regulatory perspective 
regarding the on-line pharmacies. In short, it is an issue of great 
concern and it's an issue in need of immediate attention. The Internet 
serves as an electronic international hi-way for access to, and sales 
of both legitimate therapies, products, and practices, as well as 
untested, unapproved, and unsafe therapies, products, and practices. 
While the use of the Internet for legitimate treatment modalities has 
merit, the actual practices and products encountered on ``the net'' by 
regulatory agencies are of great public health concern. In addition, we 
are experiencing great difficulties in applying current ``brick and 
mortar'' laws which were not designed to address this technology. The 
Internet, with standardized and uniform regulation, could serve as a 
method to extend healthcare and health education. We would recommend 
new legislation which would require the medical practitioners to 
license their websites as practice locations. The pharmacists and 
pharmacies should also license their websites in their respective 
states. The home page should also be required to display the city and 
state of the website.
    The Texas Department of Health (TDH) welcomes the opportunity to 
present comments to the Subcommittee on Oversight and Investigations on 
this important public health issue--Drugstores on the Net: The Benefits 
and Risks of On-Line Pharmacies. TDH is involved in the regulation of 
drugs and medical devices manufacturing, distribution, and possession 
in the state of Texas, and is very much involved in Internet sales and 
distribution of drugs and medical devices.
    TDH's perspective regarding on-line pharmacies reflects the views 
of a state regulatory agency. We can appreciate the fact that 
technology is rapidly evolving, and that the concept of tele-medicine 
on the surface appears progressive and could serve as a method to 
extend healthcare and access. The idea and practices may have merit, 
but some of the actual practices encountered by state agencies are of 
concern, and there are difficulties in applying the current laws to 
these Internet prescribing and dispensing businesses.
    The Internet has afforded great benefits which have been 
particularly manifested in the delivery of information and education to 
the public, and the enhancement of commerce. But such information must 
be viewed with caution. The information provided on the Internet is not 
reviewed or approved by any scientific or regulatory body, and to date 
no one assumes responsibility for the information provided via the 
cyber-hiway. As an example, we have encountered ``pseudo-docs'' 
presenting themselves on the Internet as physicians, when in reality 
they are not licensed medical practitioners. Not only is this a 
national concern requiring uniform regulation, the international 
information should be harmonized and standardized in a manner 
consistent with international harmonization efforts. Should new 
national regulations prove successful and regulatory actions are 
initiated as necessary, equal or similar international standards and 
enforcement, the control of foreign sites, products, and therapies will 
need to be addressed to assure international compliance. Once 
regulatory authority is established, each entity will then have the 
same or similar priorities. We're aware that this raises a completely 
different set of issues, but did want to point out that we see benefits 
as well as concerns.
    We understand the main benefit of the Internet for healthcare 
product access: confidentiality and convenience. Since a number of 
prescription drugs obtained from Internet sites are those categorized 
as ``lifestyle'' drugs (those for improved sexual performance, weight 
loss, and treatment of hair loss, etc.) the Internet purchasing allows 
one to buy without being ``seen'' and affords one the convenience of 
purchasing from home, office or ``on the road.'' This benefit could 
also be recognized as one of the elements which places a customer at an 
increased risk.
    The increased risk is due to one of the ``checks and balances'' 
placed in our healthcare system being eliminated. Safeguards to protect 
patients from injuries resulting from the use of unsafe drugs and 
devices, unapproved drugs and devices, counterfeit drugs and devices, 
and the illegal practice of medicine and pharmacy have been 
legislatively mandated, both federally and through state legislatures. 
These mandates have included or implied the requirement that a patient 
first be seen and examined by a licensed healthcare practitioner to 
receive a prescription for prescription drugs and/or devices. A 
physician-patient relationship must be established, and until the 
advent of the Internet, this was understood or specifically noted as a 
physical on-site examination. Everyone realizes this is the ideal and, 
even with these mandates, errors occur in the traditional regulatory 
world. There are occasions in the current system when physicians will 
prescribe for patients without seeing them, but it is not the norm. The 
Internet sites utilizing questionnaires and/or surveys create a 
situation where this is the norm. These types of Internet sales 
circumvent the elaborate controls our country has placed on dangerous 
drugs and/or medical devices, and thus the risks are increased. These 
also result in the majority of complaints. These controls, put into 
place by Congress and the states, established the physician oversight 
and physician responsibility for proper use based upon their education, 
knowledge, experience, and best practices, as well as the requirement 
that a licensed pharmacist dispense the prescribed drug and/or device. 
There are several pharmacy web sites which appear to be practicing 
legitimately and similarly to the currently regulated mail-order 
pharmacies.
    Two examples highlight problems associated with on-line pharmacies. 
We just recently had a complaint forwarded to us where a pregnant 
attorney completed a survey and noted on the survey that she was 
pregnant. She received Propecia', a prescription drug with 
significant warnings and precautions for women who are or could be 
pregnant. Propecia' is strictly contraindicated in women of 
childbearing age due to causing severe birth defects. The survey was 
supposedly reviewed by the site's medical director and he approved the 
cyber-prescription for a pregnant consumer. This does not meet the 
appropriate medical standard of care because they offered a 
prescription for a patient they have never seen before and based solely 
on an on-line survey. This demonstrates what happens when safeguards 
established to address products classified as ``dangerous'' are 
bypassed. Another site (see attachments) not using a survey cyber-form, 
advertises ``Phen-fen,'' controlled substances, and steroids as 
available without a prescription. ``Phen-fen'' has been removed from 
the market in the U.S. due to adverse events.
    There are the federal and state drug laws addressing specific drug 
and device regulations, and the consumer protection acts which address 
deceptive advertising and sales practices. Nonetheless, these were not 
written to control the Internet sales and deliveries from state, 
national, and international sources. There are limited resources 
available to the state and federal regulatory agencies to carry out 
enforcement actions. The emphasis must be placed on the word, 
``limited.''
    Because there is a common element of limited resources between the 
state and federal regulatory agencies, interagency cooperation in this 
regulatory arena is of particular importance. This is not necessarily 
problematic since interagency cooperation (partnerships, contracts, and 
memorandums) already exist. For those agencies not already involved in 
federal/state cooperative relationships, the template has been 
established and can easily be duplicated. This interagency cooperation 
should be utilized in all the areas mentioned above, as well as with 
education. The benefits of the Internet in education outreach must be 
utilized. Because this regulatory playing field is huge, oversight will 
be an enormous challenge, and education must be one of the components 
of that oversight.
    Many owners of the Internet websites have advocated a position of 
opposition to regulatory oversight. The Intent site, ``Soma.com,'' in 
``The Pink Sheet,'' April 5, 1999, was quoted that several ``watchdog 
organizations'' are already reviewing regulation of Internet 
prescription sales. Of the ``watchdogs'' referenced in their list, who 
they believe are providing oversight, FDA was the only one with the 
requisite regulatory authority. It is of little consequence that a 
pharmacy site does not have one of the National Association of Boards 
of Pharmacy's stamp of a Verified Internet Pharmacy Practice Sites 
(VIPPS). The verification information provided by a VIPPS seal could be 
obtained by the consumer via other Internet sites and information. The 
point is that there is no guarantee for the consumers in the ``self-
regulatory'' models being proposed by ``Soma.com.''
    At a minimum, if these new prescription drug entrepreneurs are to 
continue their Internet practices, perhaps consideration should be 
given to a federal requirement that physicians who wish to diagnose and 
prescribe on the Internet be regulated by the state medical boards at 
these Internet locations. We should consider their web sites as a 
practice location. Additionally, the same consideration should be given 
to pharmacists and pharmacies practicing on the Internet. We should 
require licensing for these sites similar to that of mail order 
pharmacies. The sites and persons associated with those sites should be 
required to display their web-specific licenses on their home page. 
These should be prominently located on the home page so the consumer/
patient would clearly recognize they are conducting business with a 
legitimate site and licensed healthcare professionals.
    In our view, these practices are not benign, they present a 
significant threat to the public health, and they necessitate serious 
consideration for close standardized and uniform regulatory oversight. 
I would like to thank you again for allowing us this time to express 
our concerns, experiences, and views. In closing, we commit to 
continuing our time, information, and resources in supporting this 
effort.

    Mr. Bryant. Thank you.
    Mr. Razzouk.

                  TESTIMONY OF WILLIAM RAZZOUK

    Mr. Razzouk. Mr. Chairman, members of the subcommittee, 
before I begin, allow me to thank you for giving us the 
opportunity to share with you what PlanetRx.com believes the 
on-line pharmacy business is and is not, should and should not 
be.
    My name is Bill Razzouk, the Chairman and CEO of PlanetRx, 
a pharmacy chain with approximately 70 million branch stores, 
each of which is on the desktop of a person with computer 
access to the Internet.
    Each of our customers, 70 million branch stores, is a 
traditional NABP pharmacy. Each one of our branch stores is a 
place where customers can come to buy over-the-counter 
products, obtain answers to their questions about prescription 
drugs and diseases, and have a licensed pharmacist fill the 
prescriptions issued to them by the properly trained and 
licensed physicians with whom they have a traditional doctor-
patient relationship. In other words, PlanetRx.com is your NABP 
virtual pharmacy, an on-line pharmacy designed with guidance 
from leaders of the pharmacy profession.
    Like your family's pharmacy, we authenticate all 
prescriptions before filling them. Like your family's pharmacy, 
we check to confirm that the prescribing physician is a 
properly licensed physician with a current DEA number.
    Like your family's corner pharmacy, at PlanetRx.com, we do 
not prescribe drugs; we only dispense them. We do not interfere 
in any way with the sanctity of the patient-physician 
relationship. All of which is to say there is very little 
conceptual difference, but enormous difference, in terms of 
convenience between PlanetRx, traditional NABP pharmacies, and 
the mail order prescription services that are used by tens of 
millions of Americans, many of whom are elderly and housebound.
    We fully understand that the concept of on-line pharmacies 
is new and a bit mysterious to some people. However, discomfort 
with the concept of e-commerce in general and 3-pharmacies in 
particular will not eliminate the reality of either. The 
Internet, as we all know, is now a major positive force in 
American business, and the legitimate emerging on-line 
pharmacies are an important part of this new environment.
    Mr. Chairman, there is no doubt that we are all concerned 
about the irresponsible practices of Internet-based prescribers 
for hire, ``doc in a box,'' doctors whose only contacts with 
their patient comes in reviewing an on-line questionnaire. Such 
practices are as abhorrent to us at PlanetRx as they are to our 
responsible competitors, to the National Association of Boards 
of Pharmacy, to the American Medical Association, and to you.
    The elimination of the Internet equivalent of illicit drug 
sales does not require new legislation. All it requires is 
vigorous enforcement of the existing State and Federal laws.
    In addition to abiding by all existing laws and 
regulations, PlanetRx also adheres to a code of principles we 
have developed for ourselves. We support the VIPPS criteria of 
the National Association of the NABP. We actively protect the 
security and confidentiality of our customers' personal 
information. We provide access to licensed pharmacists 24 hours 
a day, 7 days a week, including holidays. All of these 
activities meet or exceed traditional requirements for the 
practice of pharmacy as regulated by the States, and define the 
next generation of standards followed by responsible on-line 
organizations.
    Quite simply, unlike the NABP pharmacy, we do have some of 
the most compelling health information on the Internet. A group 
of disease-specific satellite sites that are designed for 
sufferers of chronic diseases, including such domains as 
Diabetes.com, Arthritis.com, Depression.com. We provide easily 
accessible information on drug interaction as well as a broad 
range of general medical and personalized medical information. 
We offer the disabled, injured, and seriously ill an easy way 
to go to the pharmacy without leaving their homes.
    Ultimately, we provide a place where people care about the 
needs and problems of seniors, the disabled and those who 
suffer from chronic disease and those who require ongoing 
follow-up.
    The challenge for us as an industry is to manage patient 
safety, security, and confidentiality while not limiting the 
creativity that on-line access can offer the millions of 
Americans who require health care products.
    What is needed is an innovative, aggressive effort to 
enforce existing State and Federal laws that secure legitimate 
on-line pharmacy distribution. To that end, we would like to 
use this forum today to call for a national summit meeting of 
on-line pharmacy industry and technology leaders to address the 
obvious questions and problems posed by the rogue on-line 
operators whose practices concern us as much as they do you.
    This summit, hosted by PlanetRx, would serve as an 
opportunity to design tools and establish a system to enhance 
the enforcement of existing laws and regulations, consider the 
reliability of the VIPPS seal, and develop innovative ways to 
promote consumer education regarding responsible on-line 
pharmacy actions and consider ways that ensure that patients 
have the choice to fill prescriptions either on- or off-line.
    Further, I suggest that the summit should take place within 
the next 90 days and that the first item on the summit agenda 
be the establishment of an industry-supported watchdog system 
that uses technology and trained industry experts to seek out 
and immediately report to regulatory authorities on the State 
and Federal level suspected sites that may be selling or 
prescribing medications without properly sensing.
    We believe it is certainly possible to maintain a daily 
check for unlicensed or otherwise suspect sites in order to 
immediately report them to the appropriate authorities.
    You may ask why you should allow our industry to act as a 
``neighborhood watch.'' we are offering to participate in this 
activity because we know the ``neighborhood'' well and we know 
the technology.
    Mr. Chairman, we do not believe, however, that knew Federal 
legislation is necessary at this time. What is necessary 
instead is the development of innovative ways to apply the laws 
already in place in an on-line environment that could not have 
even been imagined when the various laws were written. In the 
summit we are proposing, it will allow us together to develop 
those innovations, beginning with the daily check I just 
proposed.
    Again, thank you for giving us the opportunity to appear 
before you today. I hope I have clearly explained the practices 
of our company and provided you some viable solutions to the 
issues that confront us on this.
    [The prepared statement of William Razzouk follows:]
   Prepared Statement of William Razzouk, Chairman & Chief Executive 
                         Officer, PlanetRx.com
    Mr. Chairman, Members of the Subcommittee, before I begin, allow me 
to thank you for giving me the opportunity to share with you what 
PlanetRx.com believes the on-line pharmacy business is and is not, 
should and should not be.
    My name is Bill Razzouk, and I am the Chairman and CEO of 
PlanetRx.com, a pharmacy chain with approximately 70 million branch 
``stores,'' each of which is on the desktop of a person with computer 
access to the Internet.
    Each of PlanetRx.com's 70 million branch stores is a traditional 
neighborhood pharmacy. Each of our branch stores is a place where 
customers can come to buy over-the-counter products, obtain answers to 
their questions about prescription drugs and diseases, and have a 
licensed pharmacist fill the prescriptions that have been issued to 
them by the properly trained and licensed physicians with whom they 
have a traditional doctor-patient relationship.
    In other words, PlanetRx.com is your ``neighborhood'' virtual 
pharmacy--an on-line pharmacy designed with guidance from leaders of 
the pharmacy profession.
    Like your family's pharmacy, we authenticate all prescriptions 
before filling them;
    Like your family's pharmacy, we check to confirm that the 
prescribing physician is a properly licensed physician with a current 
DEA number;
    And, like your family's corner pharmacy, at PlanetRx.com we do not 
prescribe drugs, we only dispense them. We do not interfere in any way 
with the sanctity of the patient-physician relationship.
    All of which is to say, there is very little conceptual 
difference--but enormous difference in terms of convenience--between 
PlanetRx.com, traditional neighborhood pharmacies, and the mail-order 
prescription services that are used by tens of millions of Americans, 
many of whom are elderly and housebound.
    We fully understand that the concept of ``on-line'' pharmacies is 
new and a bit mysterious to some people. However, discomfort with the 
concept of E-commerce in general, and E-pharmacies in particular, will 
not eliminate the reality of either. The Internet, as we all know, is 
now a major positive force in American business. And the legitimate 
emerging on-line pharmacies are an important part of this new 
environment.
    Mr. Chairman, there is no doubt that we are all concerned about the 
irresponsible practices of Internet-based prescribers for hire, doctors 
whose only contact with their patient comes in reviewing an on-line 
questionnaire. Such practices are as abhorrent to us at PlanetRx.com as 
they are to our responsible competitors, to the National Association of 
Boards of Pharmacy, to the American Medical Association--and to you.
    The question before us then, is how to eliminate these unprincipled 
operators, while fostering the responsible, legitimate on-line pharmacy 
business in a way that will benefit consumers and protect their health 
interests.
    Eliminating the Internet equivalent of back-alley drug sales does 
not require new legislation, all it requires is the vigorous 
enforcement of the existing state and federal laws. For example, 
PlanetRx.com, as a responsible on-line pharmacy, adheres to all state 
and federal regulations governing the practice of pharmacy, just as a 
traditional pharmacy does:

 We only fill prescriptions that are written by authorized 
        prescribers;
 We maintain procedures that verify the authenticity of 
        prescriptions;
 We are licensed to dispense and deliver prescriptions to all 
        50 states, the District of Columbia, and all U.S. territories;
 We conduct an extensive drug utilization review (DUR) prior to 
        dispensing a medication in accordance with state law to help 
        prevent harmful drug interactions;
 We do not practice medicine--we neither diagnose patients, nor 
        prescribe medications.
    In addition to abiding by all existing laws and regulations, 
PlanetRx.com also adheres to a ``code of principles'' we have developed 
for ourselves:

 We support the Verified Internet Pharmacy Practices Sites 
        (VIPPS) criteria of the National Association of Boards of 
        Pharmacy;
 We never sell, trade, rent, or intentionally disclose or 
        access personal data without a customer's consent, except when 
        required to do so by law or legal considerations;
 We actively protect the security and confidentiality of 
        customers' personal information and use the most advanced 
        technology to take orders and to display prescription 
        information. We encrypt all personal information for 
        transactions over the Internet;
 We provide access to licensed pharmacists 24 hours a day, 7 
        days a week--including on holidays.
    All of these activities meet or exceed traditional requirements for 
the practice of pharmacy as regulated by the states, and define the 
next generation of standards followed by responsible on-line 
organizations.
    While I've made several references to our similarities to the 
traditional neighborhood pharmacy, I'd like to outline the numerous 
differentiators and benefits that PlanetRx.com., an on-line pharmacy, 
offers consumers.
    Quite simply, unlike the traditional bricks and mortar pharmacy:

 We have pharmacists available for private consultation by 
        telephone or e-mail, 24 hours a day, seven days a week, 365 
        days a year, including all major holidays;
 We are able to carry an enormous array of over 28,000 unique 
        health and beauty items;
 We provide e-mail reminders when it's time to refill 
        prescriptions;
 We have some of the most compelling health information on the 
        Internet, and a group of disease-specific ``satellite'' sites 
        that are designed for the sufferers of chronic diseases 
        including such domains as Diabetes.com, Arthritis.com, and 
        Depression.com;
 We provide easily accessible information on drug interactions, 
        as well as a broad range of general medical and personalized 
        medical information;
 Because our ``stores'' are on our customer's desktops, rather 
        than in invested overhead, we can offer lower drug prices to 
        customers, which is particularly important to the millions of 
        seniors who don't have prescription insurance;
 We offer the convenience and privacy of on-line ordering and 
        consultation with a pharmacist, making customers more likely to 
        ask questions they might be embarrassed to ask in the middle of 
        a crowded traditional pharmacy;
 We offer the disabled, injured, and seriously ill an easy way 
        to ``go to the pharmacy'' without leaving their homes.
    Ultimately, we provide a place where people care about the needs 
and problems of seniors, the disabled, those who suffer from chronic 
disease, and those who require ongoing follow-up. Using our disease 
specific ``satellite'' sites, we are developing a network of patient-
oriented communities that provide the emotional and group support many 
people lack when facing debilitating illness. At PlanetRx.com, we 
believe that providing care is an essential step in the healing 
process.
    The challenge for us as an industry is to manage patient safety, 
security, and confidentiality while not limiting the creativity that 
on-line access can offer the millions of Americans who require 
healthcare products. What is needed is an innovative, aggressive effort 
to enforce existing state and federal laws that secure legitimate on-
line pharmacy distribution. To that end, we would like to use this 
forum today to call for a national Summit meeting of on-line pharmacy 
industry and technology leaders to address the obvious questions and 
problems posed by the ``rogue'' on-line operators whose practices 
concern us as much as they do you. This Summit, hosted by PlanetRx.com, 
would serve as an opportunity to design tools and establish a system to 
enhance the enforcement of existing laws and regulations, consider the 
reliability of the VIPPS seal, develop innovative ways to promote 
consumer education regarding responsible on-line pharmacy practices, 
and consider ways to insure that patients have the choice to fill 
prescriptions either on or off-line.
    Further, I suggest that this Summit should take place within the 
next 90 days, and that the first item on the Summit agenda be the 
establishment of an industry-supported ``watchdog'' system that uses 
technology and trained industry experts to seek out and immediately 
report to regulatory authorities on the state and federal level 
suspected sites that may be selling or prescribing medications without 
proper licensing. If it's possible for an individual to screen his or 
her own e-mail, and conduct searches across the entire internet, it is 
certainly possible for an industry as net-savvy as ours to maintain a 
daily check for unlicensed or otherwise suspect sites in order to 
immediately report them to the appropriate authorities.
    You may ask why you should allow our industry to act as a 
``neighborhood watch.'' We're offering to participate in this activity 
because we know the ``neighborhood'' well, and we know the technology. 
We are here to offer our assistance and industry expertise to the 
numerous agencies in each of the 50 states, as well as federal agencies 
who are responsible for law enforcement. As Federal Trade Commission 
Chairman Pitofsky recently said, when speaking of the on-line privacy 
issue, ``We continue to believe that effective self-regulation is the 
best way to protect consumer privacy on the Internet . . .'' Similarly, 
we believe that effective self-regulation is the best way to protect 
consumers using Internet business services.
    Mr. Chairman, we do not believe, however, that new federal 
legislation is necessary at this time. What is necessary instead, is 
the development of innovative ways to apply the laws already in place, 
in an on-line environment that had not even been imagined when the 
various laws were written. And the Summit I'm proposing will allow us 
together to develop those innovations--beginning with the daily check 
I've just proposed.
    Again, thank you for giving me this opportunity to appear before 
you today. I hope I have clearly explained the practices of 
PlanetRx.com, and provided you some viable solutions to the issues that 
confront our infant industry.

    Mr. Bryant. Thank you.
    Mr. Neupert.

                 STATEMENT OF PETER M. NEUPERT

    Mr. Neupert. Thank you. My name is Peter Neupert, CEO of 
Drugstore.com, another of the responsible competitors. 
Drugstore.com is a legitimate licensed pharmacy. We only ship 
valid prescriptions from licensed physicians. We comply with 
all the State and Federal laws required. We have licensed 
pharmacists that serve our customers. We have been inspected 
already by the State boards as a part of our ordinary course of 
business in Texas, and in the State of Washington. Recently--we 
are now a publicly traded company as of Wednesday.
    Rather than talk about our business, I would rather show 
you. So we have got these two monitors, they are both on. I 
thought I would walk you through some of the benefits and 
opportunities of a legitimate licensed pharmacy.
    Here you see our home page. The mission of Drugstore.com is 
to help consumers manage their well-being, using the Web for 5 
stores in 1, to make it easy for them to save the trip to the 
drugstore. At the bottom of the front page you see our privacy 
policy clearly displayed for anybody to find it.
    Mr. Bryant. Could we stop just a minute here? Could you 
turn that TV around so people in the audience can kind of see 
that one? We can probably see it up here on this one. Some of 
you may have to move to see it better if you want to.
    Please proceed.
    Mr. Neupert. As was previously mentioned, one of the 
benefits of an on-line drugstore is the readily available, 24 
hours a day, information. Solutions is the area where we carry 
all of our information. You will see complete medical 
reference, buying guides, ask your pharmacist questions. As our 
other competitors, we have 24-hour access to our pharmacists 
and frequently asked questions that have been answered, and 
one-to-one service for customers to get their questions 
answered that they can't get answered in any traditional means, 
because the people in the retail pharmacies or mail order 
pharmacies don't have enough time.We do significant research to 
help people with their public health questions.
    Next I would like to go to the pharmacy, which is the 
department where people can learn about their prescription 
drugs and order their prescription drugs. You will notice that 
we have partnered here with Rite-Aid to help communicate to 
customers the trust that they should get with our facilities, 
and to get access to the health plans that were mentioned in 
the first panel that many competitors are having a difficult 
time.
    You can see here that we have a complete drug index which 
makes it easy for customers to shop and learn about pricing and 
get all the information that they typically get when the pills 
are dispensed. I thought I would click on one. I think one of 
the main benefits of the Web will be able to allow consumers to 
price shop. Imagine how hard it is to price shop in the retail 
world today. There is no display of what the pricing is or how 
to find out. This will help lower costs.
    You can see here that we advertise when there is a generic 
available. You can see what the cost of a brand drug is and 
what the cost is of a generic. If I had time, you could look 
and get all of the information about what this was indicated 
for, what the warnings were for and everything else, available 
24 hours a day.
    Now, I have here, I am going to go into the prescription 
summary, which is where I have some information. First I have 
to log in through our secure server. All of our information is 
stored in a secure location. Let me see if I can do this to 
protect the privacy and confidentiality of our patients.
    We use industry standard technology to accomplish this.
    This is my daughter, Kelly. She has an item ready to order. 
Another of the benefits of on-line prescriptions is the ability 
to always manage and know how many refills you have, manage all 
of your family's needs, know all of the information you may 
want to know to take care of your own individual health.
    You can see here that the number of refills--I can update 
the patient profile; and in the patient profile is all of the 
allergy information, all the medical information that you would 
be required to give to any pharmacy and all of the other things 
here. People have been wondering, is it hard to get? As you 
notice, I have down here 1-800-drugstore; customers can always 
get ahold of us. We're not trying to hide from anybody.
    The simplicity of ordering on-line is one of the main 
benefits, particularly when it comes to refills. One of the key 
health issues I mentioned, price. The other key health issue is 
compliance and making sure that it's convenient for people on 
chronic medications to stay on their drugs.
    We use E-mail as an effective communications tool to remind 
people before they run out. They can come back to the site and 
simply hit refill and order their drugs. It makes it much 
easier for them to stay compliant and avoid trips to the 
hospital or avoid other emergency trips because they've run out 
of their medication.
    I think the core issue that the panel has been discussing 
is how do you get the benefits that we've--that I've just shown 
here, the benefits of the on-line word for those legitimate 
pharmacies while shutting down the illegality or rogue 
pharmacies. I think the doctor said it well, the first is to do 
no harm.
    There are huge benefits in terms of allowing people the 
convenience, the information, the price and the selection 
available on-line. And I think those people who want to do 
things illegally are going to do things illegally, and 
customers who know that they're going to a website and not get 
a prescription know that they're trying to do something against 
the law.
    There are many laws that we're following today. We support 
the VIPPS programs, the best industry standard way to 
communicate that Good Housekeeping Seal of Approval to 
customers which I think is the real issue.
    Thank you.
    [The prepared statement of Peter M. Neupert follows:]
 Prepared Statement of Peter M. Neupert, President and Chief Executive 
                         Officer, Drugstore.com
    Good morning Mr. Chairman and Members of the Committee. I am Peter 
Neupert, President and Chief Executive Officer of drugstore.com. I 
thank you for inviting me here today, and I am pleased to have the 
opportunity to speak with you about drugstore.com. We are an Internet 
drugstore dedicated to providing a convenient, private, safe, and 
informative shopping experience to our customers.
    In my testimony, I will explain to you how drugstore.com operates, 
and our dedication to providing high quality and safe prescription 
services through our licensed pharmacy. You will conclude that the 
drugstore.com pharmacy has many of the attributes of the traditional 
corner drugstore and the well-established mail service pharmacy with 
the added capabilities of the Internet. Like community and mail service 
pharmacies, our customers must have a prescription from their doctor--
we do not prescribe medication. What's new here is not the practice of 
pharmacy, but the way we communicate with and inform customers. Our 
prescription fulfillment is built on the long-standing procedures and 
infrastructure of walk-in and mail service pharmacies. The quality 
control we have established at drugstore.com incorporates the best 
practices of mail services and community pharmacies.
    Our mission is to help consumers manage their well-being using the 
Web. Our core value proposition is to educate and inform consumers, 
while saving them time and money. I will have more to say about our 
drug information and prices later in my testimony.
Full Service Drugstore
    Before I describe our pharmacy service, which is the real focus of 
this hearing, I want to give you a snapshot of our entire site. When we 
launched our full-service online drugstore in February, 1999, we were 
responding to the growing trend of consumers taking a bigger role in 
their health care decisions. That increasing trend is apparent in the 
number of people seeking health information online. According to recent 
estimates, the number of consumers accessing the Internet for health 
and medical information has increased from 3.2 million in 1995 to 22.3 
million in 1998, because the Internet provides up-to-date information 
from a variety of sources along with person-to-person support groups.
    drugstore.com is five stores in one with health, beauty, wellness, 
personal care, and prescription drugs. We focus on those products 
designed to help people live longer and feel better, including 
dispensing medications used by consumers on a chronic basis. What is 
new is that online pharmacies and drugstores offers an exciting 
prospect for increasing public health by providing more convenient and 
informative access to health products and information. Our goal is to 
empower consumers by permitting them to make more informed health-
related purchases while saving both time and money.
    While we offer the same safety and quality of community drugstores, 
our online pharmacy has unique benefits:
    Information--Our site provides a ``Solutions'' area where shoppers 
can find the information they need to make informed purchase decisions. 
It includes buying guides, a wellness guide, a medical reference, and 
shopping advisors. We provide comprehensive drug information where 
consumers can learn about their prescription drugs, including usage, 
cautions and possible side effects, as well as drug prices. The Web is 
the only place customers can conveniently price shop for prescription 
drugs. We also post answers to the questions most frequently asked of 
our licensed pharmacists. For each product, we display all the 
information a consumer could read on the package of product--including 
all the ingredients, directions, and product warnings in a format that 
is easy to read.
    Convenience--Our site permits consumers to shop from wherever they 
have Internet access, and at anytime. Consumers can receive their 
products via direct delivery to their home or office. We make it easy 
for consumers to save time doing this chore, by saving their personal 
shopping list and by providing e-mail reminders on prescriptions drugs 
and other products.
    Selection--We offer a broad selection of products so that consumers 
can obtain products that best suit their health needs.
    Communication--Use of the Internet allows drugstore.com to 
communicate with its customers via e-mail. Our ``Ask Your Pharmacist'' 
feature, prescription refill reminders, monthly newsletters and online 
purchase order tracking information, allows continuing patient/
pharmacist communication from the comfort of the patient's home.
    Privacy--Customers can shop at our drugstore in privacy, and thus 
avoid the potential embarrassment of buying personal items or asking 
personal questions at community drugstores. Because consumers can more 
freely ask personal questions via e-mail, they will be able to take a 
more proactive role in managing and promoting their personal health.
Licensed Pharmacy
    As I have stated previously, filling prescriptions at drugstore.com 
works the same way as a community pharmacy and mail service pharmacy. 
We focus on dispensing medications used by consumers on a chronic 
basis. For acute care needs, we recommend that customers pick up their 
prescriptions from a local pharmacy. To fill a prescription at 
drugstore.com involves the same three steps at any community or mail 
service pharmacy.
    First we are provided with a valid prescription from our customer's 
physician, customer, or our customer's current pharmacy. The physician 
calls or faxes in (where permitted by law) the prescription to us at 1-
800-drugstore. At the customer's request, we will call the physician 
for the prescription. The customer may also mail us their original 
prescription or request a transfer of their prescription from their 
current pharmacy. If a customer attempts to purchase a prescription 
drug without providing a valid prescription, the customer will be 
notified promptly via e-mail that drugstore.com cannot fill the order 
until we are given a valid prescription. We do not provide prescription 
medications without a prescription, nor do we prescribe medications.
    We also contact the prescribing doctor's office to verify 
prescription orders for those controlled substances that we dispense. 
We do not dispense Schedule II controlled substances due to their high 
potential for abuse.
    Before we will fill a prescription, we require each customer to 
complete an individual patient profile of drug allergies, current 
medications, medical conditions, and preference for generic 
substitution. We carefully cross-check all of the information we get 
from the patient and doctor. We then enter the prescription order into 
a computer and perform all of the same checks for drug interactions 
that you expect from your local pharmacist. Once we have received and 
verified a new prescription, and cross-checked that prescription for 
interactions we will then fill and mail the prescription.
    We use state-of-the-art bar coding at each step of the process to 
ensure patient safety. We also use automated pharmacy systems to assist 
with the dispensing of medications. Our pharmacists then recheck each 
prescription for accuracy before a medication is sent to the customer's 
home or office. We send drug-specific patient information with each 
prescription. The shipping method is based on consumer choice and the 
type of drug. Standard shipping via U.S. Postal Service Priority Mail 
is provided free of charge to the customer.
    Through our partner, RxAmerica, we ship prescription products to 
every state in the United States. Our recent partnership with Rite Aid 
will enable customers to order refills of their existing Rite Aid 
prescriptions on our site, and pick them up at a local Rite Aid store, 
or receive them through drugstore.com's mail service. To purchase a 
prescription, the customer provides us with a credit card number for 
the cash price or copayment and insurance information.
    Our prescription drug service saves consumers time. Our vast 
information on drugs, including drug prices, enables customers to save 
money and to make more informed decisions. We are committed to giving 
customers real value. We monitor the prices of products, including 
prescription drugs, sold at national retail chain drugstores and our 
cash prices are on average lower than those of the national drug 
chains. We are leveraging the lower cost structure of the Web to lower 
costs on drugs.
    A hallmark of our pharmacy services is the patient counseling and 
customer support that we provide to help our customers use medications 
safely and effectively. Our popular ``Ask Your Pharmacist'' feature, 
which I mentioned earlier, is staffed by clinical pharmacists. It 
allows customers to ask questions online and receive personalized 
responses from our pharmacists. drugstore.com provides patients with a 
toll-free number to access a pharmacist 24 hours a day, 7 days a week. 
Customers can also access their secure, individual medication profile, 
which contains a history of their prescription purchases at 
drugstore.com. In addition, customers receive refill reminders via e-
mail, notifying them when they need to place a refill order. This e-
mail reminder service helps to promote drug compliance and improved 
patient outcomes.
    The increased convenience of our Internet pharmacy has proven 
crucial for many of our customers. We continually receive e-mail 
messages from customers that highlight the advantages of online 
shopping, as well as commending and thanking us for our innovative and 
personalized service. For example, one message from a woman housebound 
with multiple sclerosis told of how she hates asking people for 
assistance. Our site has enabled her to have the independence she 
desires in complying with her medical treatment program. A message from 
another customer emphasized how the consistency of our site permits her 
to obtain her medication even when she moves. These messages highlight 
the benefits that online pharmacies can offer consumers.
    With respect to patient privacy and the confidentiality of our 
pharmacy records, drugstore.com will not release any prescription 
information in connection with any patient identification other than to 
the patient, our partner RxAmerica which fills the prescriptions, the 
patient's authorized representative, or the prescribing or authorized 
practitioner caring for the patient. In addition, all personal 
information and credit card information are encrypted using SSL 
encryption technology. We are a licensee of the TRUSTe Privacy Program 
which is the leading online privacy seal program. The seal is awarded 
to sites that adhere to established privacy principles and comply with 
ongoing oversight and consumer complaint resolution procedures.
    Finally, because drugstore.com is dedicated to providing safe, 
legal prescription services to our customers, we have applied for 
approval into the Verified Internet Pharmacy Practice Sites (``VIPPS'') 
certification program established by the National Association of Boards 
of Pharmacy. This program will serve to inform the public whether 
online pharmacies are licensed in good standing with the appropriate 
state boards of pharmacy and other regulatory agencies, and whether 
they comply with quality criteria. Such self-regulation provides a 
means for sites to inform consumers about the site's commitment to 
compliance with the existing laws and regulations.
Compliance with Existing Laws
    drugstore.com complies with all applicable state and federal laws 
and regulations governing the provision of drugstore products and 
information over the Internet. For example, we comply with federal and 
state requirements for pharmacy licensing and registration, and for 
providing customers with relevant information about their prescription 
medications. We comply with the laws and regulations governing non-
resident pharmacies in every state that has such requirements. We and 
our distribution partners comply with laws relating to security, 
recordkeeping, and reporting for pharmaceutical sales, as well as 
medical record confidentiality. In addition, as mentioned above, we 
participate in industry efforts to self-regulate online pharmacies.
    In keeping with its reputation as a leading online drugstore, 
drugstore.com will continue to comply with applicable laws and 
regulations relating to online pharmacies and drugstores. However, we 
hope that the Subcommittee will consider that there are already 
extensive laws and regulations in place that affect online drugstores. 
It is our belief that the number of illegitimate pharmaceutical web 
sites do not exist due to lack of appropriate existing laws and 
regulations, but rather to the need for greater enforcement of those 
laws and regulations.
    Legitimate online pharmacies and drugstores are an emerging market 
which provides an exciting prospect for increasing public health by 
providing more convenient and informative access to health products and 
information. We must be careful to distinguish between safe, legitimate 
online pharmacies and profiteers using the Internet to engage in 
illegal activities with willing participants. The most practical 
approach in differentiating the two is by educating consumers and 
providing them the tools and means to identify the safe, legitimate 
online pharmacies. As I mentioned above, drugstore.com is looking 
forward to participating in the VIPPS certification program and 
displaying its emblem on our web site. drugstore.com will commit 
resources to educating consumers about the VIPPS certification, so that 
they will know how to make an informed choice about the sites they 
utilize.
    The reliance on industry self-regulation by legitimate web sites 
results from the realization that the Internet does benefit consumers 
as long as they are provided with a means of making intelligent 
choices. Other examples of such industry self-regulation include the 
Health on the Net Foundation's code of conduct for medical and health 
sites, and the Tufts' Nutritional Navigation system which rates 
nutrition web sites.
    I hope that through our mutual dedication to providing consumers 
with beneficial drugstore services, we can work together to enable 
legitimate online drugstores to continue providing efficient customer 
service. Thank you very much for the opportunity to speak with you 
today. I would be pleased to answer any questions you have.

    Mr. Bryant. I thank all of you.
    I think we have another vote and probably our last series 
of votes coming up within the half hour. So most likely if we 
can move through this and get everybody's questions answered, 
it would be good I think if we could finish so that we don't 
have to take a half hour break and come back this afternoon and 
everybody can get moving.
    So I'm going to yield time to the distinguished ranking 
member, Mr. Klink.
    Mr. Klink. First of all, I want to thank this panel. I 
think that you've given some outstanding testimony.
    Dr. Abromowitz, that was probably the best bits of 
testimony I've heard a long time. I think you have to be 
complimented on that.
    The rest of the panel was very good, too.
    Mr. Abromowitz. Thank you.
    Mr. Klink. Getting back to the VIPPS--and I will just say 
from our two industry spokespeople here, if everyone was doing 
business like drugstore.com and PlanetRx., we wouldn't have to 
have these hearings. And we appreciate the fact that you want 
to work with us. It doesn't mean we agree with everything that 
you said in your testimony.
    One of the things that I would question is that Ms. Culmo, 
who is really in the trenches, has said we really need to have 
a law on the books that says we identify who we are, we 
identify whom we're licensed by. And you seem to think that the 
VIPPS program is fine.
    My problem with that, as I said earlier, I don't know if 
you were in the room, is the VIPPS program may be fine but not 
a law enforcement agency. Can the VIPPS seal, in fact, be 
counterfeited and put on another site? What ability does the 
National Board of Pharmacy have to go out and inspect these 
sites and do the law enforcement kinds of things?
    And so I will just ask, first of all, Ms. Culmo, if you 
will kind of give a response to the testimony from the two 
industry spokespeople talking about there are enough laws on 
the books, in essence, and that they like the VIPPS program and 
they think that would be fine. What's your reaction to that?
    And then I will ask you to respond as well.
    Ms. Culmo. From our perspective, we obviously would 
disagree. We've run into a lot of difficulty in locating 
persons that are associated with Web sites. And from where we 
sat, we don't see that the VIPPS program is going to give us a 
lot more information than we have. The, ``rogue pharmacies'' 
are not going to have the VIPPS seal of approval.
    The sites so far that would be interested in that are the 
ones that appear to be more compliant and operating much more 
similar to a mail order pharmacy. So, right now, they're not 
our biggest concern.
    If we had the information on the home page, we would be 
able to, one, identify who is associated with that site and the 
practices of that site, but we would also have a location.
    There was a mention earlier about GBL, gammabutyrolactone. 
We've got quite a bit of activity with those products in the 
State of Texas, and they're mostly advertised on the Internet. 
We have several sites, some of which are supposedly located in 
Texas, and it's been extremely difficult to locate those 
persons. And one of them we tracked as far as to a public 
storage establishment, and we can't get the search warrant 
because we don't have the specific unit.
    So it gets very difficult. You sort of get yourself in a 
vicious cycle with the judicial system and the regulatory 
perspective.
    Mr. Klink. One thing before I move on and allow the 
industry spokespeople to give their response, it is unclear 
from your testimony, to me, and maybe this is because I am a 
little dim-witted at this time in the day, are you suggesting 
that each doctor who is issuing a prescription and each 
pharmacy who is filling a prescription on the Internet be 
licensed in each State in which that is done?
    Ms. Culmo. In each State, yes. Essentially that's what it 
comes down to.
    There is already similar requirements, and if I'm not 
mistaken, I believe that drugstore.com has obtained licenses in 
all 50 States, and they're already doing that. So one of the 
things there they have those licenses, they can just display 
those on their home page already.
    Mr. Klink. As long as it's displayed on the home page so 
the consumer is informed who the licensee is and where they're 
licensed, then at least we're dealing with--we can deal with 
some information. Then if you have a site which is not 
displaying it, then we know it's an outlaw site?
    Ms. Culmo. That's our assumption, yes. And in Texas, for 
instance, we have the ability to actually go in on the Internet 
and check the status of a physician and--to see if there's been 
any sanctions. If a license was actually posted on the Web 
site, the consumer could verify that automatically--in Texas, 
it's not in all States.
    But if there were a Federal requirement that they must 
license in every State, the boards of pharmacy already have 
those requirements, as do the medical boards for practicing 
physicians and pharmacists, to license with them. So it would 
just be an extension of that license.
    Mr. Klink. Mr. Razzouk.
    Mr. Razzouk. You know, we agree that the States already 
require, if you're going to practice pharmacy, that you have to 
be licensed in every State; and PlanetRX. Is licensed in all 50 
States, District of Columbia and all U.S. Territories, so we've 
gone through that rigorous screen, if you will, to become 
licensed that way.
    The VIPPS protocol--in order to be a VIPPS-approved 
pharmacy, you have to be a licensed pharmacy and you have to be 
a licensed pharmacy in all the States you do business in. So, 
theoretically, the VIPPS seal could act just as effectively as 
people having to post every license that they've got all over 
their Web site as a screen to legitimate sites versus not 
legitimate sites as we go forward to try and identify who the 
bad guys are.
    Mr. Klink. If you yield, though, the VIPPS is voluntary?
    Mr. Razzouk. The VIPPS is voluntary.
    Mr. Klink. What if we just chose not to volunteer?
    Mr. Razzouk. You can choose not to volunteer and you would 
pop on the screen and you would get looked at on a regular 
basis.
    Mr. Klink. By whom?
    Mr. Razzouk. I think I made the suggestion today about how 
we might be able to proceed to try and put together technology 
and people in a way to do that that could help support the 
agencies that testified here a little bit earlier today who 
just finally brought a Web site----
    Mr. Klink. What authority? That's the question. How often 
and what authority? Unless we have a government regulatory 
agency with authority to go in and do the inspection, to what 
benefit, what assurance do we have?
    Mr. Razzouk. I think, based on what I understand, and I may 
not have all of it, that we've got effective Federal and State 
laws on the books today that can do that.
    Mr. Klink. If you've already gone to the trouble, and I'm 
sure to some trouble, to be licensed in each of the 50 States 
and the District of Columbia----
    Mr. Razzouk. Yes, it is.
    Mr. Klink. [continuing] Drugstore.com as well, why don't 
you want all of the people that are competing with you to do 
the same thing and to display that information proudly as 
called for by law?
    Mr. Razzouk. We definitely want them to have to be 
licensed. We definitely do not subscribe to these prescribers 
on-line, people, you know, buying prescriptions through 
consultations, you know, all the things we talked about here 
today. We think you have to be----
    You know, we practice--I will point out here, Peter, a 
legitimate pharmacy, and you do that by being licensed and 
having licensed pharmacists and by not having doctors on staff 
and not by writing prescriptions for people, but by filling 
them. So we have no informal--we fully support the fact that 
any on-line pharmacy should have to be a licensed pharmacy, and 
that's incorporated in the VIPPS protocol as well.
    Mr. Klink. Well, I have no problem with the VIPPS protocol, 
that it's voluntary. But why shouldn't they, if you say there's 
no problem that they should be licensed, you think they should 
be licensed, then what's the problem with causing that to be 
displayed on the home page so that the consumer knows that 
that's done?
    Mr. Razzouk. Do you want to take it, sir?
    Mr. Klink. Let Peter have a shot so we're not dwelling on 
Mr. Razzouk.
    Mr. Neupert. I will help him out.
    The practice of pharmacies is founded on trust, and for 
those of us in the legitimate pharmacy business we would love 
to have trust be assured in the marketplace. I don't know 
that--I don't understand how creating yet another regulation 
will assure that those people who want to avoid the law will 
follow a new law. We can--the VIPPS program says we will put a 
seal up. They created a data base and a security architecture 
that says, hey, this is a way to be sure the Good Housekeeping 
Seal of Approval, that these people are licensed. If you just 
put up a license--understanding a web design, it's going to be 
supereasy for anybody who wants to create a copy of a license 
and to forge a license.
    I don't know that applying or demonstrating--displaying a 
license on a Web page solves any real problem. The issue is, 
you're going to have to enforce against those people who are 
breaking the law, today's laws or any new laws. And what the 
industry is proposing, I think, is a reasonable rule or a 
reasonable way to move forward to say we will validate that 
these people are indeed licensed, and if consumers want to only 
deal with licensed people, they will be able to do that.
    There will still be consumers who, we've heard this 
morning, who will want to break the law, as there will be 
proprietors who will want to break the law. The issue of 
enforcement remains the same.
    Mr. Klink. My problem with your proposition is simply this, 
that I think probably what bothers me most about this is 
exactly what you said, Mr. Neupert, that the pharmacists I 
think in almost every poll that I've ever seen taken of 
Americans are among the most trusted people in America. We 
trust other pharmacists. We really do and for good reason.
    Every pharmacist that I know when I walk in the pharmacy 
they have displayed behind them their license. They're licensed 
by the State. All we're asking is that, as we go into this new 
E-commerce, you post your license. And if you post a false 
license--if it's in a bricks and a mortar pharmacy and somebody 
goes in and finds it out, Ms. Culmo is going to see that that 
you are arrested. They will come down on you. And if you post a 
false license on the Internet, then we can come after you right 
away.
    It helps us. It's an expeditious way of us finding out 
what's going on.
    And you're right. We can counterfeit licenses, driver's 
license. We can counterfeit a lot of things. We can counterfeit 
the VIPPS seal. We can counterfeit a lot of things.
    But if we just ask from the E-commerce sites the same thing 
we're asking from everybody else, post your license, let the 
public know that they can check you out, if the license number 
is on there, we can check with the State of Pennsylvania, we 
will call Harrisburg, or we will call the other State capitols 
around the country. We can check on you.
    But if it's a VIPPS seal, who do we check with and how do 
we find out if and when the last time was when they were 
expected and what authority the inspectors had? That's the 
difficulty that I think I have with your answer.
    I think Mr. Catizone wants to step in.
    Mr. Catizone. Please.
    As part of the VIPPS program, each facility will have to be 
currently inspected by a State board of pharmacy, so that will 
be an official regulatory, mandatory action. And that report 
becomes available to the VIPPS program.
    Mr. Klink. How often?
    Mr. Catizone. At this point, it will be at the point of the 
first issuance of the seal and then every year or 2 years 
thereafter depending upon complaints, depending upon the 
regulatory schedule of the State and also the renewal cycle for 
the VIPPS.
    Mr. Klink. I see as many leaks as a sieve in this, but I 
will jump over to Ms. Culmo because I think she wants to jump 
in.
    Mr. Catizone. Can I finish my response?
    Mr. Klink. Please do, and I will get to the Ms. Culmo.
    Mr. Catizone. I not disagreeing with posting the license on 
the Web sites. That might be a good idea for the consumers. But 
it won't be independently verified. I can provide you with a 
list of States in which the consumers would not be able to 
reach that agency within 2 to 3 months and obtain a 
verification of whether or not that practitioners was licensed 
simply because they are under understaffed, don't answer the 
phone. They can contact a Web site. We have people working to 
answer the phone to verify that licensure. It's a problem there 
for the consumer to have some sort of independent verification 
that information on that site is truly legitimate and real.
    Mr. Klink. First of all, I don't know what agency you're 
talking about. Because the board of pharmacy, it's a board, and 
I imagine they're different in each State, and therein would 
lie a problem, also.
    By the way, Mr. Catizone, I want to thank you. I 
understand--I had to leave the room for a second--that you said 
that you would help us get information on some of these sites 
and you can tell us who were legitimate and who weren't. I 
appreciate your offer of help with that, and I think it's 
amazing that you all at the National Association of Boards of 
Pharmacies are able to do and the FDA was not able to do that. 
And I think it shows a great willingness on your behalf to work 
through this problem.
    Ms. Culmo, let me ask you to jump in here. Then I think my 
time is expired.
    Ms. Culmo. Thank you.
    The only thing I was going to point out is that if you 
counterfeit a license, be a pharmacist, a pharmacy license or a 
medical practitioner, which are also required to display their 
licenses at their practice sites, you've broken the law, and 
there's consequences and penalties for that. If you counterfeit 
a VIPPS seal, there would be no consequence for that. It's a 
common legal requirement.
    Mr. Bryant. Thank you.
    Just very quickly. If you were to go to some type of system 
that you've talked about, Mr. Catizone, could each State have 
its own site with a listing of certified people with their 
number, and then if a person wanted to go to pharmacy X, they 
could go to pharmacy X, see the seal, see the number, and then 
go back into another site and make sure it's properly licensed 
in Tennessee or Pennsylvania and then go back and make the 
purchase?
    Mr. Catizone. Part of the security provision of the VIPPS 
program is that, when a consumer clicks on the VIPPS seal, they 
are brought to a Web site that provides all that information 
about the site as well as the States where they were licensed 
and a direct link to that State's Web page to verify 
independently that licensure, as well as additional information 
for the consumer about other pharmacies or other States where 
that may be licensed.
    Mr. Bryant. In that system, where does it break down?
    Mr. Catizone. We're not aware of anyplace where it breaks 
down. We're certain that hackers can duplicate the seal, as 
they can anything else, but our security system always focuses 
on the consumer getting independently verified information from 
the direct sources.
    Mr. Bryant. And it seems to be education would be a big 
factor here, much as the Good Housekeeping seal. You know, if 
consumers are taught you need to be--especially in this arena 
you need to be looking for that seal, and then if we can get a 
verification process in place, you know, it seems to be that 
would be logical.
    But let me move on to my colleague from Michigan, Mr. 
Stupak.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Abromowitz, you quote in your testimony of June 16 a 
Chicago Tribune article and it says, no one has a clear grasp 
of the scope of the Internet prescribing phenomena, but some 
experts estimate that about 400 such prescription Web sites 
exist, about half based overseas.
    It appears that number of sites seems to go larger each 
month. Would you agree?
    Mr. Abromowitz. Yes, sir, I certainly agree to that; and 
that's been determined by the AMA staff.
    Mr. Stupak. Where are all of these sites getting their 
drugs from?
    Mr. Abromowitz. I'm sorry?
    Mr. Stupak. Do you have any idea where they're getting 
their drugs from?
    Mr. Abromowitz. No, I don't.
    Mr. Stupak. If we have all of these sites coming up 
monthly, just popping up, where do they get the Viagra, all the 
other stuff that they're selling out there, Propecia and all?
    Mr. Abromowitz. Mr. Stupak, that's an excellent question. 
And, very frankly, as a practicing physician, you know, it just 
amazes me that they can, very frankly, can purchase this, these 
medications. And I think we have to address that question with 
the pharmaceutical industry. I personally don't know where 
they're getting all of these drugs, but it amazes me that these 
drugs are being able to be dispensed like that.
    I mean it's--it's against patient care. It's--the stories 
we heard today, the anecdotes we heard throughout the country. 
And before I leave, I want to compliment the Commerce 
Committee, especially the subcommittee. The American Medication 
Association is proud to participate in this because we think 
this is a gigantic problem in American medicine today and for 
our patients that we all serve.
    Mr. Stupak. Sure.
    Does anyone else have any comments on that, where they're 
getting these drugs? You have the manufacturer, you have the 
wholesaler, you have the pharmacist, and you have the person 
with the prescription. Those are the four links, and there 
should be a flow here that you should be able to track.
    Then somehow we get this fifth link, the Internet; and, 
boom, as I said earlier, a number of times, we had 26 of them 
in January, we're up to about 400 now, how are they getting 
access to all of these drugs?
    Mr. Abromowitz. What I would fear, to answer that 
personally is, that many of these drugs that they're sending 
out to the doorsteps do not--would not pass inspection, you 
know, or U.S. Pharmaceutical standards of care. I mean, I don't 
know where the drugs are made, in the back room of some garage 
someplace or something else, so I would question the fact where 
many of these drugs do not meet the standards for what they've 
been prescribed for.
    That would be my question, you know, and I would challenge 
that, if I were the person ordering those drugs.
    Mr. Stupak. Mr. Catizone, it looks like you wanted to jump 
in there.
    Mr. Catizone. If these pharmacies and distributors are 
obtaining these from legitimate manufacturers, there is a paper 
trail that must exist to trace those drugs back. By Federal and 
State requirements, a manufacturer cannot ship prescription 
drugs to anything but a licensed wholesaler or a licensed 
pharmacy; and, therefore, there has to be a paper trail of both 
invoices in order to bill for those drugs and the fact that 
that is a licensed or a registered site that can't accept and 
receive prescription drugs.
    Mr. Stupak. And I agree with you. I wrote the 1993 Chemical 
Diversion Act to get ahold of ephedrine, which is being used to 
make methcathinone, cath as we call it. We got that one pretty 
much stamped out. And myself and Chairman Upton, we've been 
working on the GAP problem and, again, we're putting 
precursors, we're putting the tracers on it, so we have some 
good idea.
    But then could not FDA and the others really look at this 
paper trail and try to make some determination from it?
    Mr. Catizone. Yes.
    Mr. Stupak. Just for the record, we need more than a 
nodding of the head, we need a yes or no.
    Mr. Catizone. I'm afraid to say anything. Representative 
Klink is gone. I can speak then. Otherwise, I would say, yes, 
that paper trail should exist.
    Mr. Stupak. Ms. Culmo.
    Ms. Culmo. Being involved in the manufacture and 
distribution of drugs, the paper trail should exist, but it's 
probably not the paper trail that you envision. And what we 
encounter is the manufacturers--it's easier, because it's the 
start of the process. And--so it's easier for them to document 
where their product goes initially.
    Once it leaves their facility, then it's out of their 
control again. It goes to a wholesaler. And from the 
wholesaler, it can go to a numerous number of entities, some 
authorized to possess and some not authorized to possess. And 
what we encounter a lot of times, if the wholesaler is not 
automated, then it's extremely difficult to have that paper 
trail to show where it went to the next location.
    The other thing is lot numbers are not tracked. The 
controls for prescription drugs are not the same as what's 
required for controlled substances. So it would not be 
difficult for a lot of these products to go out back doors of 
overnight storage sites. You have drop centers when there's 
mass quantities being trucked or trained to different 
locations. We have diversion problems through physicians' 
offices and hospitals. You have huge purchasing groups that 
also warehouse their drugs. So it's not exactly as black and 
white as the four entities, and it's difficult to track.
    Mr. Stupak. Yeah, right. And in the legislation we've 
always drafted it was always precursors, which is a little 
easier to track than the final product which gets shipped 
around quite a bit.
    Doctor, if I may, in your testimony, you quote a May 11 New 
York Times article, and that reads, ``a company based in the 
Channel Islands of Britain called Direct Response Marketing is 
selling Xenical over the Internet to just about anybody who 
electronically fills out a medical questionnaire that is 
reviewed by a company doctor who then prescribes the drug.''
    You then add the following: If this trend continues, a 
triple problem exists. First, patients in the United States 
would easily be able to obtain drugs that have not been 
approved by the U.S. FDA. Second, these drugs would not have 
been tested in rigorous clinical trials. And, third, patients 
would be receiving these drugs without the advice of a 
physician.
    Can you expound on that for us? Can you describe what the 
present regulatory system is designed to do and why and 
elaborate on how it might be undermined by some of these 
instant prescription Web sites?
    Mr. Abromowitz. Well, the drugs, you know, manufactured and 
prescribed here in the U.S. and controlled by the U.S. 
Standards have to meet the pharmaceutical industry standards. 
You know, the drugs in the foreign market--and I'm no world 
expert on this, but to the best of my knowledge probably would 
not have to meet those standards. Xenical, you know, is a drug 
used basically to, you know,--which blocks fat absorption, 
weight loss, lowering cholesterol and things of--the various 
lipids and things of that sort, so it's a hot-ticket item.
    And the only thing I know--and I personally have refrained 
from prescribing this drug until I see what the side effects 
are, which is--as a family physician for a number of years, I 
don't really prescribe all the new drugs initially until I see 
what the side effects are, and Xenical has some very 
significant ones like diarrhea. But the fact is--for some 
patients.
    So U.S. Drugs have a certain standard, a very rigid 
standard to meet, as my associates here at the table have told 
you from the pharmaceutical level. I'm not quite sure whether 
the foreign companies will meet those standards. And, again, 
that's either a legislative or a regulatory situation. I fear 
that, very frankly, Mr. Stupak, they don't meet those 
standards.
    Mr. Stupak. The AMA, they've been recently come out pretty 
harsh on these instant Web sites, have they not?
    Mr. Abromowitz. Absolutely. AMA feels that there must be an 
establishment--you take--for example, you're taking a symptom, 
you're taking a symptom of, I don't know, obesity and then 
you're putting a prescription drug, you're missing the 
interchange between the physician, you're missing a diagnosis, 
you're missing a treatment, you're missing a history, you're 
missing a physical examination, you're jumping from one arena 
to another, and you're missing the whole aspect of good medical 
practice.
    Mr. Stupak. For our other two witnesses--and, again, your 
Web sites look like they're trying to take all the health and 
concerns and safety of your consumers in mind, but do any of 
the consumers ever call you back up and say, hey, this drug 
didn't work right or, geez, I want a refund, it isn't doing 
what I want, or I have a question? Do you get--your consumers 
call you back?
    Mr. Razzouk. We certainly get questions from consumers, and 
they get to talk to our pharmacists with their questions. But I 
don't have perfect knowledge of this, but I'm not aware yet of 
an instance where consumers tried to return a prescription 
medication to us, I mean, that was prescribed by the doctors, 
which are the only ones that we fulfill. But we certainly 
answer questions for consumers. Our pharmacists intercede in 
the fill-in process if they see a drug-to-drug interaction. 
They have the patient's history. They call the patient and say, 
did you--you know, to ensure--perhaps call the patient's doctor 
to say there's going to be interaction here you're not aware 
of. You need to change this prescription.
    So we proactively, you know, get engaged that way. But we 
don't, and I'm sure Peter doesn't either, we don't accept--we 
don't take return prescriptions. You can't do that. That's 
illegal.
    Mr. Neupert. We only buy quality approved drugs, No. 1. We 
have a lot of customer contact. We've answered over 20,000 ask-
your-pharmacist questions by E-mail since our launch on 
February 24. That's 20,000 customers whose questions otherwise 
wouldn't have gotten answered. That's just the E-mail 
questions. We answer hundreds of questions a day from customers 
trying to find out--I want to place my order, this is where I 
want to go, this is how I'm going to do it, and we respond.
    And absolutely, when we have questions about a customer's 
prescription order, we verify with a doctor, just like a 
traditional neighborhood or a mail-order pharmacy would. And we 
have, as I plastered on our site, 1-800-drugstore to make it 
superconvenient for people to make sure that they can get ahold 
of a pharmacist 24 hours a day if they need to.
    Mr. Stupak. Well, that's one of the concerns we had when we 
went through all of these Web sites. There's no way to contact 
them if you have a question. How do you follow-up? Is there any 
follow-up back with the patient? And your two companies and 
maybe one or two others at least had a phone number and an 
address you could at least track to.
    Thank you. I have nothing further, Mr. Chairman.
    Mr. Bryant. Thank you.
    Let me just kind of wind this thing down little bit. I have 
a couple of questions.
    Mr. Razzouk, this weekend the Wall Street Journal discussed 
the issue of pharmacy benefit managers or PBMs. You briefly 
mentioned this issue of PBMs in your testimony as well. Can you 
explain more about the issue of PBMs and how it affects your 
companies and others like you?
    Mr. Razzouk. It's a very complicated area in managed care. 
PBMs are pharmacy benefit managers, that's what PBM stands for, 
and they are entities that are either hired by health care 
organizations or provide health care services themselves who 
put together retail, put together a network of brick and mortar 
retail pharmacies that their members can have their 
prescriptions filled at and be covered by insurance. And the 
major pharmacy benefit management companies also have their own 
pharmacies that are mail order pharmacies that they own and 
that they operate.
    And to date, with very few exceptions, they have been very 
adamant about not allowing the legitimate on-line pharmacies to 
act as a retail pharmacy, as Peter and I have described retail 
pharmacy and neighborhood pharmacy today, and be part of the 
bricks and mortar equivalent of a retail network where a 
patient could come and get their prescription filled and be 
covered by insurance.
    And the reason they have decided not to do that is they 
view us as a potential competitor somewhere down the road, so 
they have all proactively said they're not going to let any of 
us into their network. Whereas if I was a neighborhood 
pharmacy, community pharmacist, if I was a RiteAid store, if I 
was a CVS store, if I was a Walgreens, if I was a Gilespie's, I 
would have a heck of a chance being in that network, because 
they wouldn't view me as a competitor, and that's exactly what 
is going on today, and it's wrong.
    Mr. Bryant. Thank you.
    Mr. Neupert, in your written statement you indicated that 
you would be willing to commit resources to educating consumers 
about the VIPPS certification. What do you have in mind on 
that?
    Mr. Neupert. Well, as I said before, the practice of 
pharmacy is based on trust, and it's important to our business 
to separate ourselves from those rogue sites. And we spend 
significant dollars to educate consumers about our brand name 
and about our services and about the convenience of ordering 
on-line. And we would certainly be willing to commit to spend 
some of those resources to promote VIPPS and what it means and 
that we're VIPPS certified.
    And I think that's generally how things work when you have 
a voluntary, industry-supported seal of approval. It's in the 
industry's best interests to communicate its benefits to 
customers. Otherwise, that means nothing. And so we would take 
some of those marketing funds and communicate to customers in 
all the vehicles that we do, whether it's on our Web site, 
whether it's on web advertising or whether it's in our 
television advertising, the benefits of being a VIPPS member. 
And that's how they would learn how to use it and why it's a 
good thing.
    Mr. Bryant. I have no additional questions.
    And certainly, as someone who has practiced law a long 
time, I learned not to do this, but let me, before we close, 
ask if any of you have any closing comments. You all came a 
long way to be here, and you don't have to say anything, but if 
anyone would like to get in one final word, you're welcome to 
do it now or forever hold your peace.
    Thank you very much for all being here, and we appreciate 
your very able assistance. This hearing is adjourned.
    [Whereupon, at 1:50 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
    Prepared Statement of S. Lawrence Kocot, Senior Vice President, 
 Government Affairs and General Counsel, National Association of Chain 
                              Drug Stores
                              introduction
    Mr. Chairman and Members of the Subcommittee, the National 
Association of Chain Drug Stores (NACDS) appreciates the opportunity to 
submit a statement to the Subcommittee on issues relating to obtaining 
prescription pharmaceutical products through the internet.
    Founded in 1933 and based in Alexandria, Virginia, the National 
Association of Chain Drug Stores membership consists of 136 retail 
chain community pharmacy companies. Collectively, chain community 
pharmacy comprises the largest component of pharmacy practice with over 
97,000 pharmacists. The chain community pharmacy industry is comprised 
of more than 19,000 traditional chain drug stores, 7,000 supermarket 
pharmacies and nearly 5,000 mass merchant pharmacies. The NACDS 
membership base operates more than 31,000 retail community pharmacies 
with annual sales totaling over $158 billion including prescription 
drugs, over-the-counter (OTC) medications and health and beauty aids 
(HBA). Chain operated community retail pharmacies fill over 60% of the 
more than 2.73 billion prescriptions dispensed annually in the United 
States. Additionally, NACDS membership includes nearly 1,400 suppliers 
of goods and services to chain community pharmacies. NACDS 
international membership has grown to include 105 members from 26 
foreign countries.
    Pharmaceutical internet websites allow consumers to order new and 
refill prescriptions, obtain important information regarding the 
prescriptions they are taking, receive medication refill reminders, or 
access their complete medication profile. Better use of medications, 
improved health outcomes, reduced health care costs, and convenience 
for the consumer can result.
    Internet pharmaceutical sites represent another electronic medium 
for ordering prescriptions - such as the commonly-used fax or 
telephone. For example, just like a patient takes a prescription to a 
pharmacy, a physician calls in a prescription, or the patient calls in 
a refill, internet pharmacy sites are alternative ways to order 
prescription medications. After verification by the pharmacist that the 
prescription order is legitimate, the pharmacy prepares and delivers 
the prescription that was ordered through the site.
    Many of these pharmacies are the same ones that prepare 
prescriptions for consumers that are obtaining prescriptions through 
traditional sources. These pharmacies and pharmacists are licensed by 
state boards of pharmacy, and must comply with a comprehensive set of 
laws and regulations.
    There are, however, certain questionable and unethical 
pharmaceutical prescribing and dispensing practices occurring through 
some internet pharmaceutical sites. For example, some pharmaceutical 
sites focus solely on the prescribing and dispensing of certain 
``lifestyle'' drugs. These prescriptions are often provided without the 
benefit of complete medical information about the patient, and it may 
be questionable whether the dispensing pharmacy is licensed.
    Moreover, some sites allow pharmaceutical products to be ordered, 
but the products are actually shipped from sites that are ``off 
shore.'' There are potential quality of care and legal concerns with 
the pharmaceuticals that are imported into the United States.
    These situations raise legitimate concerns about quality of care 
and safety issues regarding the prescribing and dispensing of 
prescription drugs through certain pharmaceutical internet sites. 
However, while the use of the internet may have brought these issues 
more into public focus, the concerns raised have been successfully 
handled for many years within current oversight structures to assure 
the quality and integrity of the prescribing and dispensing process.
      nacds perspectives on internet-based pharmaceutical services
 Legitimacy of Internet Pharmaceutical Sites should be 
        Acknowledged: Policymakers should recognize the consumer and 
        health care benefits of ``legitimate'' licensed internet 
        pharmaceutical sites. These sites should be contrasted with 
        sites whose only goal is to promote or sell a certain 
        ``lifestyle'' pharmaceutical outside the context of a 
        professional-patient relationship, or import pharmaceuticals 
        from other countries.
 Physician-Patient Relationship should Exist: NACDS believes 
        that prescribing pharmaceutical products through the internet 
        should only occur within the context of an established 
        physician-patient relationship. That is, a physician or other 
        health professional licensed to prescribe should be making the 
        judgement concerning the prescribing of a drug based on 
        reliable, complete information required within the scope of 
        practice, including a physical assessment of the patient and 
        diagnosis of the medical condition.
 Existing Oversight Structures Provide Protections: NACDS 
        believes that sufficient Federal and state oversight already 
        exists that can continue to adequately protect the consumer 
        from unsafe pharmaceutical prescribing and dispensing 
        practices, including those that occur over the internet:
  State boards of pharmacy are responsible for regulating 
            all pharmacies operating in their state, including internet 
            and mail service pharmacies. Some states also require 
            pharmacies that operate outside of their state but ship 
            products to consumers within their state, to be licensed. 
            The development by the National Association of Boards of 
            Pharmacy (NABP) of a certification program for those online 
            pharmacies that voluntarily wish to post this seal of 
            approval on their site lends one additional safeguard to 
            the system. This seal is known as VIPPS - Verified Internet 
            Pharmacy Practice Site.
     State boards of medicine regulate medical practice within 
            their state. Prescribing privileges are granted by the 
            state. If physicians engage in prescribing for patients 
            with whom they have no valid relationship, the state 
            medical boards are responsible for taking appropriate 
            disciplinary action.
     Food and Drug Administration (FDA) has authority over 
            pharmaceutical importation. Offshore sources of 
            prescription drugs, whether accessed by the patient via 
            telephone, mail or internet, that ship to U.S. consumers 
            are within FDA's jurisdiction. NACDS has worked with the 
            FDA to identify ``off shore'' pharmacies that are sending 
            pharmaceuticals into the United States. FDA should enforce, 
            with the assistance of the U. S. Customs Service and 
            possibly the Drug Enforcement Administration, the 
            prohibition of foreign sources' ability to ship these drugs 
            into the United States.
 Consumer Education Component Important: As with any health 
        care service, the consumer needs to be well informed about the 
        benefits and risks of obtaining pharmaceuticals through various 
        methods, including the internet. NACDS believes that it will be 
        important to fully educate consumers about using the internet 
        for pharmaceutical services and the types of questions they 
        should ask. Moreover, consumers need to be educated about the 
        potential hazards of obtaining pharmaceuticals from ``off 
        shore'' sites, given the potential problems with the quality 
        and integrity of these products.
                               conclusion
    NACDS does not believe it is necessary to expand the jurisdiction 
of federal agencies to regulate online sales of prescription drugs. 
Rather, there are provisions in current state and federal laws that 
will adequately protect the consumer from unsafe internet practices.
    Mr. Chairman and Members of the Subcommittee, NACDS looks forward 
to working with you, consumers and other interested parties to assure 
the quality and integrity of the pharmaceutical distribution system, 
including for pharmaceuticals obtained through legitimate internet 
sites.
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